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Japan has seen its second interest rate rise in just over six months.

The latest rise of 0.25 per cent to 0.5 per cent is seen as an indication that the Japanese economy is recovering. Japan's central bank had kept rates at zero for six years in order to encourage economic recovery until July last year.

Last night, however, the central bank decided that the recovery was well under way voting 8-1 on an interest rate rise.

An interest rate rise was expected following the release of figures last week that the economy grew 4.8 per cent for the fourth quarter in 2006. An increase in consumer spending is said to have helped boost the economy.

Announcing the figures, the director of national accounts at the Cabinet Office, Masayuki Goto, said that cheaper oil prices helped boost the spending budgets of the Japanese. Extra cash was spent on luxury items such as TVs, mobile phones, cars and travel.

"The data confirmed that the economy is continuing to recover," said Mr Goto.

GDP grew 1.2 per cent in the quarter, with consumption also up 1.1 per cent.