Japan overstated GDP component data for years, inflating growth figures

The Japanese government overstated construction orders data received from the industry for years, PM sid, in a practice that may have had the effect of inflating the country's economic growth figures.

The Japanese government overstated construction orders data received from the industry for years, Prime Minister Fumio Kishida said on Wednesday, in a practice that may have had the effect of inflating the country's economic growth figures.

Kishida made the comment in a parliamentary session after an Asahi newspaper report that the Ministry of Land, Infrastructure, Transport and Tourism had been "rewriting" data received from about 12,000 select companies since 2013 at a pace of about 10,000 entries per year.

It was not clear why the government started the practice of rewriting the data. It is also unclear how gross domestic product (GDP) figures may have been affected, though analysts expected any impact to be minimal particularly as the companies concerned were likely small in scale.

"It is regrettable that such a thing has happened," Kishida said. "The government will examine as soon as possible what steps it can take to avoid such an incident from happening again."

He added that "improvements" had been made to the figures since January 2020 and that there was no direct impact on GDP data for fiscal year 2020 and 2021.

More broadly, the concern for some is the credibility of data upon which market participants rely for forecasting.

"The biggest problem is not the effect on the GDP per se but the damage to reliability of (official) statistics," said Saisuke Sakai, senior economist at Mizuho Research and Technologies.

"We can't help doubting this kind of issue could happen across government ministries," Sakai added, referring to another flaw in health ministry data found in 2018.

Sloppy

The survey compiles public and private construction orders which in the 2020 fiscal year totalled roughly 80 trillion yen ($700 billion), and is among data used to calculate GDP.

For the survey, the ministry collects monthly orders data from construction companies through local prefecture authorities. Companies that were late in submitting orders data would often send in several months' worth of figures at once at a later date, the Asahi said. In these instances, the ministry would instruct local authorities to rewrite the orders for the combined months as the figure for the latest, single month.

"This won't give much of a boost (to construction orders data). Overall GDP data is unlikely to change," said Akiyoshi Takumori, chief economist at Sumitomo Mitsui DS Asset Management.

Considering Japan has hundreds of thousands of construction companies, the ratio of those concerned is very small, he said. "How much influence do they have? The kind of sloppy company - which puts out numbers late - is probably not a big one." Land Minister Tetsuo Saito, member of the Komeito party - the junior partner of the ruling coalition - confirmed the practice in parliament, calling it "extremely regrettable".

Asked about the issue, the government's top spokesperson said only that the land ministry had been instructed to analyse "as soon as possible" what led to the practice.

"We will first wait for the results of that investigation," Chief Cabinet Secretary Hirokazu Matsuno told a news conference when asked whether past GDP figures, the government's monthly economic report, or other data may need to be revised.

The rewriting of the data, which may be in breach of law, continued until this March, the Asahi said.
 

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