Japan's economy has narrowly avoided recession, highlighting the economic challenges facing the East Asian giant even as the stock market hovers at multi-decade highs.

Japan's Cabinet Office said on Monday that gross domestic product (GDP) grew at an annualized rate of 0.4% from October to December, an upward revision from previous provisional data that showed a contraction of 0.4%.

On a quarterly basis, GDP expanded by 0.1%, an upward revision from the forecast for a 0.1% decline.

Last month, the Japanese government released preliminary figures showing the economy unexpectedly slipped into recession due to weak domestic demand and consumer spending.

The revised figures mean Japan has emerged from recession, defined as two consecutive quarters of negative growth, but remains the world's fourth-largest economy after losing third place to Germany. It continues to exist.

This improvement in numbers may raise expectations that the Bank of Japan will end the unprecedented negative interest rate policy it introduced about 10 years ago as soon as this month.

Japan's economy has suffered modest growth through the "lost decade" years following the bursting of a massive asset bubble in the early 1990s.

Despite Japan's economic woes, Tokyo's stock market is soaring as foreign investors take advantage of corporate governance reforms that have led to a weaker yen and higher returns for shareholders.

The benchmark Nikkei stock average exceeded the 40,000 yen mark for the first time earlier this month after surpassing its 1989 high in February.