Bank of Japan : Output Gap and Potential Growth Rate

The 'output gap' -- which serves as an indicator for the level of economic activity, and, consequently, for the pressure for price change -- and the 'potential growth rate' -- which reflects the growth capacity of Japan's economy from a longer-term perspective -- are useful concepts for judging economic and price conditions. It should be noted, however, that as these cannot be observed as objective data, they have to be estimated by some means.

The Bank of Japan's Research and Statistics Department prepares these data on a regular basis for assessing the state of Japan's economic activity and prices, and it also releases the estimation results on the Bank's website on a quarterly basis. These estimates are, in principle, released on the third business day in January, April, July, and October.

For the estimation methods, please refer to Hara et al. (2006) 'The New Estimates of Output Gap and Potential Growth Rate,' Bank of Japan Review Series (2006-E-3).

Please keep in mind that the data need to be viewed with some latitude as the output gap and potential growth rate estimates may differ considerably depending on the estimation methods and also as they are subject to estimation errors.

Date of publication: January 6, 2016

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