TOKYO (AFP) -- Japanese land prices surged 8.6 percent over the year to January as the economic recovery fuels a boom in real estate construction, a government survey showed Wednesday.

The rise was much bigger than the 0.9 percent gain seen in the previous year, when land prices had increased for the first time in 14 years, raising hopes that the economy was finally exiting years of deflation.
The average price of land along side major roads in Japan rose to 126,000 yen (1,059 dollars) per square meter as of January 1 from a year earlier, the National Tax Agency reported in one of several annual surveys of land prices.
Land prices in Tokyo shot up 13.1 percent, after a gain of 3.5 percent the previous year, reflecting a scramble to build new condominiums and shopping centers as the economy enjoys its longest recovery in post-war times.
While asset price deflation appears to have ended in Japan, consumer prices have resumed their decline, falling for five straight months.
The property market collapse contributed to pushing Asia's largest economy and its stock market into a long deflationary spiral, encouraging consumers to put off spending and leaving banks saddled with bad loans.
New buildings are now springing up around the capital although the market is still far from the dizzying heights of the late 1980s, when the grounds of the Imperial Palace were famously valued at more than the state of California.
The most expensive piece of land in the country last year remained a patch alongside the main street in Ginza, one of Tokyo's most exclusive shopping areas and home to some of the most expensive real estate on earth.
It was valued 24.96 million yen per square meter, recovering to levels seen in 1989 before the bursting of the asset bubble, the survey showed.
Prices rose 8.1 percent in the western city of Osaka and by 9.1 percent in Nagoya in central Japan.
Average land prices in rural areas held steady from a year earlier, finally stabilizing after a decline of 5.7 percent the previous year.
But prices kept falling in 31 regional provinces, adding to disparities between land values in urban and rural areas.
The tax agency assesses land values at about 410,000 locations across Japan