Ja­pan to re­vise wages cal­cu­la­tion in GDP

Gulf Times Business - - BUSINESS -

Ja­pan’s govern­ment said yes­ter­day it will amend the cal­cu­la­tion of work­ers’ com­pen­sa­tion in the na­tion’s gross domestic prod­uct and prob­a­bly re­vise its draft budget after it un­der­stated wages data for more than a decade due to faulty polling meth­ods.

The re­vi­sions are not ex­pected to change the pace of eco­nomic growth.

All the same, it is an em­bar­rass­ment for Prime Min­is­ter Shinzo Abe, be­cause his govern­ment has en­acted sev­eral poli­cies to elim­i­nate the risk of de­fla­tion by en­cour­ag­ing wages to rise.

In­ac­cu­rate wage data makes it difficult to as­sess whether Abe’s poli­cies are work­ing and could raise ques­tions about the cred­i­bil­ity of other data, leav­ing pol­icy mak­ers blind-sided in their ef­forts to fos­ter sus­tain­able eco­nomic growth.

“Es­cap­ing de­fla­tion is Abe’s big­gest eco­nomic goal, so if you can’t trust the data you can’t make ap­pro­pri­ate pol­icy de­ci­sions,” said Hiroshi Miyazaki, se­nior econ­o­mist at Mit­subishi UFJ Mor­gan Stan­ley Se­cu­ri­ties.

“Only a year ago the govern­ment changed the sam­pling method to try to im­prove wages data. And now they’re say­ing they un­der­stated the data.

Do we re­ally know what’s go­ing on?”

The Cabi­net Of­fice, which com­piles GDP, said yes­ter­day it will pub­lish re­vi­sions for wages from 2016 to 2017 around the end of this month.

Next month it plans to pub­lish re­vi­sions to data from 2015 and ear­lier.

Ja­panese Fi­nance Min­is­ter Taro Aso also said yes­ter­day the govern­ment is likely to re­vise its budget draft for the next fis­cal year to pay for a short­fall of em­ploy­ment in­sur­ance ben­e­fits caused by er­rors in the coun­try’s wage data.

The likely budget revision – a rare move – would fol­low the rev­e­la­tion that the labour min­istry mis­cal­cu­lated work­ers’ av­er­age wages for years.

The data er­ror has caused the min­istry to un- der­es­ti­mate pay­ments made un­der Ja­pan’s em­ploy­ment in­sur­ance pro­gramme, which in­cludes un­em­ploy­ment ben­e­fits, and an­other in­sur­ance cov­er­ing com­pen­sa­tion for work­place ac­ci­dents.

“Eco­nomic in­di­ca­tors pro­vide the ba­sis for de­ci­sion on fis­cal and eco­nomic poli­cies and they must al­ways be ac­cu­rate,” Aso told re­porters after a cabi­net meet­ing. “It’s very re­gret­table that the wages data will be re­com­piled.”

The Labour Min­istry said yes­ter­day it un­der­stated monthly reg­u­lar wage data from 2004 to 2017 due to in­ac­cu­rate polling meth­ods that re­duced the sam­ple size.

Labour Min­is­ter Takumi Ne­moto told re­porters he is still in­ves­ti­gat­ing the mo­tives be­hind us­ing a smaller sam­ple size.

In com­pil­ing the monthly data, which cov­ers some 33,000 firms with five or more full-time em­ploy­ees, the labour min­istry is sup­posed to col­lect sam­ples from all the com­pa­nies that em­ploy 500 or more work­ers.

But it turned out that the data sam­pling failed to cover two-thirds of some 1,400 busi­nesses in Tokyo for an un­spec­i­fied pe­riod of time, min­istry of­fi­cials said.

Domestic me­dia re­ported the sam­pling er­ror ex­tends back for 15 years.

To rec­tify its er­ror, the labour min­istry yes­ter­day re­vised reg­u­lar wage data from Jan­uary 2012 to Oc­to­ber 2018.

“We use monthly wage data for some charts in our eco­nomic out­look re­port,” a spokesman at the Bank of Ja­pan said.

“We want to ex­am­ine the im­pact of this in­ci­dent based on ma­te­rial re­leased to­day and the re­sults of the (labour min­istry’s) in­ves­ti­ga­tion.”

Chief Cabi­net Sec­re­tary Yoshi­hide Suga said yes­ter­day the govern­ment would ex­am­ine all eco­nomic in­di­ca­tors.

The budget draft was com­piled in De­cem­ber and was due to be sent to the par­lia­ment later this month for ap­proval be­fore April 1.

Abe’s cabi­net last month ap­proved a record ¥101.5tn ($937.12bn) an­nual budget draft, fea­tur­ing spend­ing to off­set the pain of a planned sales tax hike sched­uled for Oc­to­ber.

Ja­panese Fi­nance Min­is­ter Taro Aso at a press con­fer­ence in Tokyo. Aso said yes­ter­day the govern­ment is likely to re­vise its budget draft for the next fis­cal year to pay for a short­fall of em­ploy­ment in­sur­ance ben­e­fits caused by er­rors in the coun­try’s wage data.

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