TOKYO (BLOOMBERG) - Japan's gross domestic product (GDP) expanded in the third quarter rather than contracting as previously thought, meaning the economy did not enter a recession earlier this year.

GDP rose an annualised 1 per cent in the three months ended Sept 30, compared with a preliminary figure that had indicated a 0.8 per cent drop, data from the Cabinet Office showed on Tuesday (Dec 8).

Economists, who changed their forecasts after surprisingly strong capital expenditure numbers last week, expected an increase of 0.2 per cent.

The revision is good news for Prime Minister Shinzo Abe, who has made reviving the economy a priority for his administration, although growth continues to lag behind record corporate profits and rising share prices.

The government is still expected to compile an extra fiscal spending package this month after the Bank of Japan in 2015 refrained from adding to its record monetary stimulus programme.

"The economy will probably have a steady recovery this quarter, driven by a pick-up in exports and production," Mr Hiroaki Muto, chief economist at Tokai Tokyo Research Centre in Tokyo, said before the report was released.

"Domestic consumption also is looking better and employment and income conditions are recovering."

After the economy shrank 0.7 per cent in the April-June period, a second straight quarter of contraction in the three months through September would have seen Japan meet the common definition of a recession.

Underscoring his optimism amid mixed signals from economic data, central bank governor Haruhiko Kuroda said as far back as September that it would not be unusual for the economy to expand in the third quarter.

Data from the Finance Ministry last week foreshadowed the chance of a GDP upgrade, with capital spending jumping more than 11 per cent in the three months ended Sept 30 from a year earlier.

A year ago, strong capex numbers raised hopes for a turnaround but on that occasion the recession proved to be deeper than initially expected.