Japan's economy grew at an annual rate of 7 percent last quarter, the fastest in more than 13 years.

　　Companies such as Sharp Corp and Canon Inc increased investment and falling unemployment spurred consumer spending.

　　The world's second-largest economy outpaced the 4 percent estimate for US growth.

　　Gross domestic product grew 2.7 percent in 2003, the fastest in three years, the Cabinet Office said in Tokyo.

　　Growth in the quarter was the fastest since Japan's bubble economy collapsed in 1990, slashing property values and leading to three recessions.

　　Japan's Finance Minister Sadakazu Tanigaki said the government "needs to continue to fight deflation" after traders said Japan sold yen to prevent its gains from curbing exports and pushing down import prices.

　　"The figures were quite outstanding," said Hitoshi Yamamoto, who manages about US$1 billion in Japanese equities as the president at Commerz International Management (Japan) Ltd.

　　"The only concern left is the impact of a strengthening yen."

　　The Bank of Japan sold yen at about 105.60 to the US dollar after the GDP report was released, said traders who deal with the central bank. The yen closed at 105.64 from 105.66 late on Tuesday in New York.

　　The yen's 13 percent advance in the past year may hurt overseas sales and slow Japan's growth this year, investors and company executives said.

　　A strong currency cuts the value of a company's overseas sales when turned into yen, makes Japanese products more expensive abroad, and attracts cheaper imports.

　　The GDP deflator, a measure of price changes that is used to calculate the difference between nominal and real GDP, fell 2.6 percent from a year earlier, the second-biggest drop in a 23-quarter slide. Quarter-on-quarter, real GDP rose 1.7 percent in the fourth quarter and nominal GDP, which isn't adjusted for price changes, rose 0.7 percent.

　　So far, rising export volumes are countering a stronger currency as demand grows in China, the US and Europe.

　　Japan's trade with China surged 30.4 percent last year to US$132.4 billion, setting a record for the fifth straight year, a government-affiliated trade organization said yesterday.

　　The figures from the Japan External Trade Organization, or JETRO, cover both imports and exports in the year to December 31, and are based on dollar conversions of Finance Ministry data.

　　Japanese exports to China rose for the fifth straight year to US$57.2 billion, up 43.6 percent from the previous year, led by electronics parts, industrial machinery and auto products. Other growing sectors included construction machinery and machine tools. China's blossoming car market pushed Japanese auto exports to China up by 30 percent.

　　The United States remained Japan's leading export market, accounting for 24.6 percent of Japanese global exports - 2.6 percent lower than a year earlier. But China, second in place with a 12.2 percent share, is increasingly growing in importance.

　　Imports from China jumped 21.9 percent to US$75.2 billion, also a fifth straight annual rise. Imports rose in personal computers, DVD players, printers and other office equipment.

　　Japan's trade deficit with China shrank to US$17.95, down US$3.9 billion from the previous year.

　　(Bloomberg News/AP)