Investors are increasingly interested in Japan’s macro environment, according to several vendors taking part in the Japan Alternative Data Expo 2024. This report reviews a study that uses CO₂ concentration estimates in Japan to forecast economic growth. It is the first study that uses data collected from a Japanese greenhouse gas observing satellite and validates the effectiveness of using such data.

QUICK VIEW

• Positive correlations are confirmed between the CO₂ concentration estimates and Japan’s economic growth, even though companies have reduced emissions.
• The study confirms a correlation between CO₂ concentrations and economic activity, with the strongest correlation found when measuring economic activity with a high-frequency consumption estimate model constructed using credit cards, new car sales and department store sales data. The correlation to real GDP is positive but weaker – and there is an even weaker relationship to nominal GDP.
• Combining a consumption estimate model built on satellite-based regional CO₂ concentration data into a model constructed by credit cards, new car sales and department store sales data could enhance the accuracy of macro assessments and deliver more timely results than using either alone.
• The model’s improved predictive power is particularly significant for data during the pandemic, where the lockdown policy disrupted department store sales.