Nowcasting Japan's GDP

Abstract

This paper backtests a nowcast of Japan's real GDP growth. Its distinguishing features are use of genuine real-time data, a new revision analysis to track the nowcast's evolution, and a comparison with a market consensus forecast at 13 monthly forecasting horizons. The nowcast's forecasting accuracy is comparable to that of the consensus at most, but not all, monthly horizons. Our revision analysis finds the nowcast for 2011:Q2 over-reacting to the large temporary shock of the March 2011 earthquake. The onset of COVID-19 triggers the nowcast for 2020:Q2 growth to take a precipitous descent, in tandem with the consensus.

Keywords: nowcasting, real-time data, dynamic factor models, state-space models

JEL Classification: E17, E37, C53