Japan’s economy surges in quarter

Japan’s economy grew faster than expected in the fourth quarter after consumer spending surged from the biggest drop in a decade and business spending gained, leading to speculation that the country’s central bank could raise interest rates next week.

The gross domestic product of the world’s second-largest economy grew at an annual 4.8% pace in the last three months of 2006, the government said Wednesday. Third-quarter GDP growth was revised to 0.3% from 0.8%. Economists had estimated fourth-quarter growth at 3.8%.

The Bank of Japan has cited weak consumer spending and slow inflation as reasons for keeping its key rate unchanged at 0.25% at its last two meetings.