From quarter to quarter, the gross domestic product grew 0.9 percent in the three months ended March from the previous quarter. It was the second straight quarterly growth.
The Cabinet Office credited the latest results to healthy consumer spending and higher exports, Kyodo News reported.
The results should please the government of Prime Minister Shinzo Abe, which has made it a priority to pull the country out of chronic deflation and kick-start the world's third-largest economy through various stimulus measures. Japan's central bank also has doubled its inflation target to 2 percent.
These measures have already helped stem the yen's appreciation against the U.S. dollar. A lower yen makes Japanese goods cheaper. The U.S. dollar has been trading at over the 100-yen mark lately.
The Nikkei-225 index crossed the 15,000 mark Wednesday on the Tokyo Stock Exchange for the first time since January 2008 as investors, encouraged by the dollar's appreciation, helped lift stocks of Japanese exporters.
CNNMoney said the 3.5 percent growth rate was much better than the 2.7 percent forecast by analysts.
The Wall Street Journal said economists expect stronger growth down the road as the new policies gain momentum.
"How much domestic demand will grow will be key," Masamichi Adachi, senior economist at J.P. Morgan Securities Japan, told the Journal.