Tokyo  - Japan's economy grew 3.7 per cent in the second quarter, the first growth in five quarters, as the world's second-largest economy broke from its worst postwar recession, the government said Monday.

The increase represented a huge swing from the first quarter when Japan's gross domestic product (GDP) fell by an annualized 11.7 per cent, and the quarter before that, which saw a dive of 13.1 per cent.

Private consumption and exports as well as government stimulus measures contributed to the positive growth, but private investment continued to remain weak.

Analysts warned, however, that it was too early to be optimistic, and the benchmark Nikkei 225 Stock Average plunged 3.1 per cent as investors worried that an end to stimulus spending by Japan and other governments would hinder the world economic recovery.

In releasing its preliminary second-quarter GDP estimates Monday, Japan's Cabinet Office said exports for the quarter recovered by 6.3 per cent, setting their fastest pace of growth since 2002, while imports remained sluggish, down 5.1 per cent in the April-to-June period.

Private consumption, which accounts for more than half of Japan's economic activity, increased for the first time in three quarters by 0.8 per cent, and public investment made its biggest leap since 1998 of 8.1 per cent.

Takahide Kiuchi of Nomura Securities Co said Japan's economy should grow more during the current quarter but growth in exports, private consumption and public investment might subside in the next three months while increases in corporate capital investment might also slow.

The senior economist expected the economic growth would grow by a bigger margin during the July-to-September quarter but said it is too early to say that the Japanese economy has entered a real recovery.

Rising exports, the effects of stimulus packages and inventory increase are not sustainable, the economist said, adding that it was inevitable that the nation's economic growth would slow starting in the fourth quarter.

A real recovery in the Japanese economy would only come in the latter half of 2010, Kiuchi predicted. (dpa)