Forecast accuracy of the Japanese government: Its year-ahead GDP forecast is too optimistic

This paper evaluates accuracy and efficiency of the real GDP forecasts made by the Japanese government over the past 22 years. The government's 16-months-ahead forecast has upward bias of 0.7 percentage points, and is significantly inferior to the mean forecast of private institutions or a vector autoregression forecast that uses real-time data only. Moreover, the government forecast is inferior to these benchmark forecasts not only in the 'recessionary' 1990s but also in the 'prosperous' 1980s. This result casts serious doubt on the assertion that the government intentionally produced inaccurate forecasts in time of recession.