Japan's economy grew by less than previously forecast during the third quarter, because many firms ran down their stocks of unsold goods.
The nuts and bolts of Japan's economy are being scrutinised
Gross domestic product (GDP) rose by 0.2% in the three months to the end of September, less than the forecast 0.4%.
Instead of voicing concerns, analysts said it pointed to an improved economic environment as firms adjusted to stronger consumer and business demand.
With their stockpiles depleted, firms will now have to boost production.
"A fall in inventories is actually a bright sign for the economy," said Economics and Financial Services Minister Kaoru Yosano.
Japan has been turning around its economy, the world's second-biggest.
The unemployment rate is coming down, consumers and firms are more confident about the future and are spending and investing more, while a period of deflation seems to be drawing to a close.
Japanese shares have been among the world's best performers this year because investors are betting that company order books will start to fill up and employee wages will rise.
During the third quarter, capital investment rose by 1.6%, and private-sector consumption, one of the main drivers of growth, increased by 0.4%.
"The recovery in employment and incomes should continue bolstering consumption ahead," said Ryutaro Kono, an economist at BNP Paribas.
"And the recent machinery orders data suggests capital spending will maintain an uptrend into the fourth quarter onwards," he said.
According to Friday's figures, if the economy continued to grow at its current pace, Japan's GDP would expand by 1% this year.
"It is difficult to find any part of the economic puzzle that would lead you to be less confident about the full-year 2006 outlook than you were six months ago," said Richard Jerram, an economist at Macquarie Securities.