Japan's economy grew at an annual rate of 4.8 per cent in the fourth quarter of 2006, the highest level in nearly three years.

The Japanese government said the growth in gross domestic product (GDP) was driven by strong consumer spending on travel, mobile phones and TV's.

According to figures from the Cabinet Office, consumption jumped 1.1 per cent on the same period in 2005.

Masayuki Goto, director of national accounts at the Cabinet Office, said: "The data confirmed that the economy is continuing to recover."

Market analysts had expected the Japanese economy to expand by 3.9 per cent in the October-December quarter.

Masayuki Goto, Cabinet Office: "The data confirmed that the economy is continuing to recover."

Japan's economy - the world's second largest - surged by 2 per cent in the third quarter of 2006.

GDP grew by an annual rate of 2.2 per cent for the whole of 2006, after growing 1.9 per cent in 2005 and 2.7 per cent in 2004.

The 4.8 per cent annual growth rate is the highest since the first quarter of 2004, when the economy grew by 5.1 per cent.

GDP measures the value of all goods and services produced within a country in a given period of time.

It is considered the most accurate indicator of a country's economic performance.

Last July, the Bank of Japan increased its key interest rate for the first time in six years to 0.25 per cent.

And many analysts now expect Japan's central bank to increase rates to 0.5 per cent when they meat again later this month.