Twenty-two years of Japanese institutional forecasts

This paper evaluates accuracy and rationality of real GDP forecasts made by 38 Japanese private institutions over the past 22 years. It finds that about 80% of current-year forecasts and year-ahead forecasts made by them pass various tests for rationality. Moreover, the encompassing test reveals the following results: (a) All of these forecasts outperform the naïve forecasts; (b) About half of their current-year forecasts are inferior to the corresponding forecast of VAR, VECM, or the Japanese government; (c) Almost all of their year-ahead forecasts are significantly superior to the corresponding forecast of VAR or the Japanese government, but one-third of them are significantly inferior to VECM forecast; (d) The consensus forecast outperforms typical institution's forecast.