Japan rebounded faster than expected from its pandemic-driven slump in the run-up to the Tokyo Olympics.
Official figures show the world’s third-largest economy grew at twice the rate forecast in April to June.
But analysts have warned growth will be modest this quarter after a state of emergency was reimposed to ease a spike in Covid-19 infections.
Meanwhile, new data also shows that the economic recovery of its larger neighbour, China, is losing steam.
Preliminary data show Japan’s gross domestic product (GDP) grew by an annualised 1.3% in the second quarter of the year. That came after a 3.7% slump in the previous three months.
The latest figures were far better than the expected gain of 0.7% and came as spending by individuals and businesses bounced back from the initial impact of the coronavirus.
However, Japan’s recovery remains much slower than has been seen in other advanced economies like the US, which recorded a 6.5% jump in GDP for the second quarter of the year.
Japan’s relatively weak rebound highlights how the government has struggled to contain the pandemic.
“I have very mixed feelings about this GDP result,” Economy Minister Yasutoshi Nishimura said after the data was released.
“Our priority is to prevent the spread of the virus. It’s very bad for the economy for this situation to drag on,” he added.
In 2020, Japan’s economy shrank by more than 4.8% over the year, its first contraction in more than a decade.
The country’s economy emerged from last year’s initial blow from the pandemic thanks to robust exports, although the slow rollout of its vaccination programme and a series of state of emergency measures have hurt consumption.
At the same time a spike in cases of the Delta variant in other parts of Asia has further disrupted supply chains for some Japanese manufacturers. This could hurt factory output and threaten the already fragile recovery.
In Tokyo, Japan’s benchmark Nikkei share index closed 1.6% lower on Monday, its third session of losses in a row.
Meanwhile, in China factory output and retail sales both rose more slowly than expected last month, compared to a year ago.
It is the latest sign that the recovery of the world’s second-largest economy is losing steam as export growth cools and new Covid-19 outbreaks disrupt business.