TOKYO - JAPAN'S economy grew at a faster than expected 3.3 per cent annualised pace in the first quarter of 2008 despite a global credit crunch and US economic slowdown, official figures showed on Friday.

The world's second-largest economy remained in sound health as robust exports to China and other emerging markets offset weaker demand in the United States for Japanese cars and other goods.

A rebound in housing investment and rising consumer spending also helped to ensure a third consecutive quarter of positive growth for Asia's biggest economy, which is gradually recovering from recession in the 1990s.

Gross domestic product (GDP) grew by 0.8 per cent from the previous quarter, according to a preliminary estimate from the Cabinet Office.

Market forecasts were for a quarter-on-quarter expansion of about 0.7 per cent and an annualised pace of 2.7 per cent.

At the same time the government revised down its estimates for GDP growth in the fourth quarter of 2007 to a quarter-on-quarter rate of 0.6 per cent, from 0.9 per cent previously.

Earlier in the year there had been worries that Japan's economy might contract in the first quarter due to the global slowdown, but most analysts are now confident Japan can avoid a recession in the first half of 2008.

Despite sluggish wage growth, consumer spending grew by 0.8 per cent in the first quarter from the previous three months, while exports soared 4.5 per cent.

Private residential investment surged 4.6 per cent as construction activity recovered following a lull last year caused by stricter building regulations.

Corporate capital spending on the other hand fell by 0.9 per cent as companies became less willing to invest in new factories and equipment amid an increasingly tough business climate.

Despite the unexpectedly brisk growth, analysts believe the Bank of Japan is unlikely to raise its super-low interest rates any time soon given the uncertain outlook for the global economy.

The central bank has kept its key rate at 0.5 per cent, the lowest among major economies, since February 2007.

Japanese share prices rose 0.86 per cent in early trade in the wake of the unexpectedly brisk growth figures and overnight gains on Wall Street. -- AFP