In a recent statement, the Bank of Japan (BOJ) emphasized the significance of analyzing the “output gap” and “potential growth rate” as useful indicators for assessing economic activity levels and inflationary pressures. These metrics provide insights into the long-term growth potential of the Japanese economy. However, since they cannot be directly observed as objective data, estimation methods are required.
The BOJ’s Research and Statistics Department regularly conducts estimations of these indicators and utilizes them in the assessment of economic and price conditions. The results of these estimations are published on the BOJ’s official website once per quarter, typically on the third business day of January, April, July, and October.
For detailed information on the specific estimation methods of the output gap and potential growth rate, refer to the research paper titled “Revisiting the Output Gap and Potential Growth Rate” by Kawamoto et al. (2017), published by the BOJ’s Research and Statistics Department in April 2017.
It is important to note that the estimated values can vary significantly depending on the chosen estimation methodology and may contain various estimation errors. Thus, it is crucial to evaluate them with a sufficient degree of flexibility and caution.