Japan's economic growth strongly beat expectations in the first quarter, but it's largely getting a yawn or even forecast cuts from economists looking at the rest of the year.
"While we are encouraged by the better-than-expected report, there are a couple of things that take the shine off the apple," Tim Quinlan, an economist at Wells Fargo Securities, said in a note Wednesday.
For one: inventory growth, he said. That added 0.5 percentage point to non-annualized expansion, the data showed.
"When inventory accumulation is your engine for growth, you might be in for a short ride," he added, although he noted the increase came after three straight quarterly declines.
Surprising economists, Japan's gross domestic product (GDP) expanded an annualized 2.4 percent in the first quarter, compared with the previous quarter, beating the 1.5 percent print expected in a Reuters poll. But growth for the October-December quarter was revised down to 1.1 percent on-quarter from the previous 1.5 percent read.
Quinlan isn't alone in concerns on inventories.
"Businesses eventually will have to sell," Martin Schulz, senior economist at Fujitsu Research Institute, told CNBC. "That requires demand domestically, which is still slow… It requires the traditional export boost that they haven't done so far."