Preliminary GDP data indicated that the Japanese economy grew unexpectedly in the three months to March, mainly because of a slump in imports that fell much faster than exports.

However, the surprise expansion in official GDP could not conceal data exposing lacklustre domestic demand, although so far this has not derailed controversial plans to raise a sales tax in October.

Data shows that Japan’s economy grew at an annualised 2.1% in the first quarter – improving on a 1.6% expansion in the October to December period, and overturning market expectations that it would contract by 0.2%.

However, imports slid 4.6% – the biggest drop in a decade  – with exports falling by more than a 2.4%, leading to a net export contribution to GDP reported Reuters.

The figures were being watched for signs that a poor performance would delay the government’s plans to hike a sales tax later this year to address public debt caused by ballooning social security costs, which it has indicated now remains on schedule.

Some policymakers had called for the tax increase from 8% to 10% to be delayed in the context of uncertainties in the world economy – including slowing growth in China against the background of its trade war with the US.

Japanese exports and factory output are being hit by the slowdown in China and the worsening trade war, and Tokyo has indicated that it will use its G20 chairmanship in June to rebuild trust in the global trade system.

The planned tax increase has already been delayed once by Japan’s prime minister, Shinzo Abe, but economy minister Toshimitsu Motegi indicated following the latest GDP figures that the plans remain on track.

“There’s no change to our view that the fundamentals supporting domestic demand remain solid,” Motegi told reporters, reported Reuters.