* Q1 capex +4.5 pct yr/yr, seasonally-adjusted +1.3 pct m/m
* Suggests upward revision to revised Q1 GDP data out June 8
* Recurring profits +26.6 pct yr/yr to record amount for Q1 (Adds analyst's quote, detail)
TOKYO, June 1 (Reuters) - Japanese companies picked up the pace of their investment in plant and equipment in January-March, highlighting a nascent return to the level of business spending needed to drive economic recovery and put a decisive end to deflation.
Ministry of Finance (MOF) data out on Thursday showed companies raised capital expenditure in January-March by 4.5 percent from the same period last year, led by spending for the production of new-model cars and investment from real estate and construction firms.
It marked a second straight quarter of annual growth in capital expenditure after posting 3.8 percent growth in the previous quarter.
Excluding software, capital expenditure grew 1.3 percent from the previous quarter on a seasonally-adjusted basis, rising for three quarters in a row and following a 3.5 percent gain in the previous period, the MOF data showed.
The data will be used to calculate revised gross domestic product (GDP) for the January-March period due on June 8 at 0850 JST (2350 GMT June 7). A preliminary estimate showed Japan's economy grew an annualized 2.2 percent in the first quarter on the back of rising global demand.
"The capex component of GDP will likely be revised up to around plus 0.6-1.0 percent on the quarter from the preliminary estimate of plus 0.2 percent," said Hidenobu Tokuda, senior economist at Mizuho Research Institute,
Overall GDP growth for the first quarter may also be revised up to an annualized rate of around 2.5 percent, although the scale of the revision will depend on inventory levels, he added.
"Companies are raising capital expenditure in part to cope with labor shortages, instead of boosting wages. But wages need to grow as well in order to spur consumer spending and help the Bank of Japan achieve a 2 percent inflation target."
A recent run of indicators points to continued economic expansion in the current quarter, with exports and factory output rising and a labor market tightening, although wage growth and household spending remain sluggish.
The MOF capex data showed capital expenditure by manufacturers and non-manufacturers grew 1.0 percent and 6.3 percent respectively in the first quarter from a year earlier.
Corporate profits rose 26.6 percent in January-March from a year earlier, up for a third consecutive quarter. The amount of recurring profits, at 20.1 trillion yen ($181.20 billion), was the biggest on record for a January-March quarter, driven by brisk demand for cars and smart phones, an MOF official said.
Sales rose 5.6 percent year-on-year in the first quarter, up for a second straight period, the data showed.
($1 = 110.9300 yen) (Reporting by Tetsushi Kajimoto; Editing by Eric Meijer)