Japan economy expands 1.6 per cent in 2013, but growth slows in last quarter

Japan's economy logged its best performance in three years as Prime Minister Shinzo Abe's growth blitz drove the expansion, but weak second-half data and a sales tax rise scheduled for April are expected to dampen hopes for a firm recovery.

The 1.6 per cent expansion last year marked the first annual figures under Abe and his policy blitz dubbed Abenomics, after the conservative swept national elections on a ticket to restore Japan's fading status as an economic superpower.

Abe's government was likely to champion the figures published yesterday as proof that the drive to stoke growth and conquer years of deflation was taking hold.

Since Abe swept to office in late 2012, the yen lost about a quarter of its value against the US dollar, giving a boost to Japanese exporters, while the Nikkei-225 Index soared 57 per cent last year to post its best performance in more than four decades.

But critics fear a tax rise in April, crucial for chopping Japan's massive national debt, will curtail the budding recovery.

The sales tax is set to increase to 8 per cent from 5 per cent, the first rise since the late 1990s.