This might give little lift for the market, as this proves that the world's second largest economy is on the right way to recovery from the worst recession since WWII.

Exports was the main reason behind today's cheerful report, as exports is the main pillar for economic recovery is increasing alongside higher demand, but still deflation risks threatening the economy that makes worry about the strength of recovery.

Japan's gross domestic product grew an annual 4.6% in the fourth quarter of last year after growing 1.3% that was revised to 0.0%, while the reading topped analysts' estimates of 3.6%.

The GDP expanded 1.1% in 4Q from the previous three months compared with a previous revised 0.0% from 0.3%, while forecasts referred to 0.9%.

Overseas shipments gained 5% in the fourth quarter from the previous there months, and net exports added 0.5 percentage points to the GDP.

However, the surging yen remains the main concern for Japanese exporters, keeping in mind that it gained about 5% in the past six months corroding exports earnings.

The Bank of Japan decided to fight deflation and the surging local currency through pumping 10 trillion yen as short term loans for commercial banks at 0.1%, and the bank accepted Japan government bonds, corporate bonds, and commercial papers as a collateral.

The BOJ is expected to keep interest rates at 0.1% in 2010 to give more time for the economy to benefit from low borrowing costs, and overcome deflation.