Global Markets

Japan concedes overstating some government economic data for years

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For years, the Japanese government inflated construction orders data obtained from builders, Prime Minister Fumio Kishida said on Wednesday, potentially undermining the reliability of official figures extensively utilized by investors and economists.

It was unclear why the government began the practice of changing statistics. It is also unclear how the builders’ gross domestic product (GDP) estimates were affected, though experts expected any impact to be minor, given that the builders involved were likely to be tiny enterprises.

“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 made the remark at a parliamentary session after the Asahi newspaper reported that the Ministry of Land, Infrastructure, Transport, and Tourism had been “rewriting” data received from approximately 12,000 select companies since 2013, at a rate of approximately 10,000 entries per year.

Kishida stated that “improvements” to the figures had been made since January 2020 and that there was no direct impact on GDP data for fiscal years 2020 and 2021.

While the impact on previous GDP figures may be minor, the revelation is sure to raise concerns about the dependability of statistics that economists and investors rely on to analyze and forecast changes in the world’s third-largest economy.

It is also not the first time that faults with official data have been raised, such as a hole in health ministry statistics in 2018.

“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 said.

Story by : Norvisi Mawunyegah