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"The solid [performance] confirms the economy continued to recover from its pandemic-induced decline," Stefan Angrick, senior economist at Oxford Economics, wrote in a research note.
"However, high-frequency data show that momentum started to wane in December amid a pick-up in Covid-19 cases."
Angrick said that he expected the measures "to set back, but not derail, the recovery in 2021, particularly since an early lifting of restrictions seems likely."
Japan has also just granted its first approval for a coronavirus vaccine, giving the green light to the Pfizer-BioNTech shot. Sunday's news further spurred hopes that the recovery can pick up pace.
"At this stage, Japan's prospects look more favorable and the downside risks are beginning to fade. Not only are local cases from the third wave past their peak, but the approval of the Pfizer vaccine is a significant development which will allow the inoculation drive to begin later this week," said Shahana Mukherjee, an economist at Moody's Analytics.
"We maintain a cautiously optimistic view of Japan's recovery in 2021, provided the vaccine drive takes place without much interruption," she told CNN Business.
Japan is not the only country reporting better GDP data. On Monday, Thailand and Singapore both posted solid new figures, which helped build investors' confidence, according to Jeffrey Halley, senior market analyst of Asia Pacific at OANDA.
"The underlying picture is one of a nascent recovery in ... Asia [outside of China]," Halley wrote to clients. "The optimistic tone is likely to continue into Europe unless we get some negative headline surprises."
The FTSE 100 gained 1.4% in early trading in London. Germany's DAX increased 0.4%, and France's CAC 40 added 1.1%.
— CNN's Junko Ogura in Tokyo contributed to this report.