Retail sales climbed by 5.8% from a year earlier, while household spending rose by 2.6%.
Policymakers have been trying to boost domestic sales to offset weaker exports.
Car subsidies were cited as one of the main reasons for April’s spending.
“The government’s subsides are pushing up sales of cars,” said Tokyo-based economist Haruka Kazama from Mizuho Research Institute.
At the same time, Mr Kazama added that consumer sentiment was also improving following the earthquake and subsequent tsunami that hit Japan last year.
“Last year people didn’t travel much after the earthquake, but this year we see people willing to spend more money on vacations,” he said.
The retail sales increase seen in April was less than the 6.3% increase that many analysts had forecast. It was also almost half the rate seen in March when retail sales jumped by an annual rate of 10.3%. Household spending was up 3.4% in March.
“We would need to see an increase in salaries for consumption to improve further, ” said Shuji Tonouchi of Mitsubishi UFJ Morgan Stanley Securities.