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Japan has admitted to exaggerating some government economic numbers.

by Seerat Fayaz   ·  December 15, 2021   ·  

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For years, the Japanese government exaggerated figures on building orders received from builders. Fumio Kishida, Japan’s Prime Minister, stated on Wednesday. It’s an admission that might smear the official figures that investors and economists rely on. 

The reason for the government’s data-altering activity remained unclear. It’s also unknown how the construction industry’s gross domestic product (GDP) estimates were affected, but experts believe the impact to be minor, given that the builders engaged are likely to be small businesses. 

“It’s unfortunate that this has happened,” Kishida stated. “The government will investigate as quickly as possible what actions it can take to prevent a repeat of this situation.”

After the Asahi newspaper reported that the Ministry of Land, Infrastructure, Transport, and Tourism had been “rewriting” data collected from approximately 12,000 chosen enterprises at a rate of roughly 10,000 entries each year since 2013, he made the remark in a parliamentary session. 

According to Kishida, “improvements” to the numbers have been made from January 2020, with no direct impact on GDP data for fiscal years 2020 and 2021. 

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

It’s also not the first time that official data has been questioned, with a problem in health ministry data being discovered in 2018. 

“The largest issue is the harm to the veracity of (official) data, not the effect on GDP,” said Saisuke Sakai, senior economist at Mizuho Research and Technologies. 

“We can’t help but believe that this type of problem may occur across government ministries,” Sakai added. 

The study gathers governmental and private building orders, which totaled around 80 trillion yen ($700 billion) in the 2020 fiscal year and are used to compute GDP. 

The ministry gathers monthly orders data from construction enterprises through local prefecture authorities for the survey.

According to the Asahi, companies who were late in reporting data would sometimes turn in several months’ worth of numbers all at once. In these cases, the ministry would advise local authorities to restate the combined months’ orders as the total for the most recent single month. 

Meanwhile, when a company’s entry was absent, the ministry calculated a rough amount by averaging orders from the rest of the industry for that month, resulting in double-counting after the missing money came, according to the newspaper. 

“Overall GDP data is unlikely to change substantially,” said Sumitomo Mitsui DS Asset Management’s chief economist, Akiyoshi Takumori.

He claims that, with hundreds of thousands of construction enterprises in Japan, the proportion of those affected is relatively modest. 

In parliament, Land Minister Tetsuo Saito, a member of the ruling coalition’s junior partner, the Komeito party, acknowledged the practise, calling it “very sad.” 

When asked about the matter, the government’s top spokeswoman replied simply that the land ministry had been ordered to look into what led to the practice “as quickly as feasible.” 

When asked if historical GDP estimates, the government’s monthly economic report, or other data could need to be amended, Chief Cabinet Secretary Hirokazu Matsuno said at a press conference, “We will first wait for the outcome of that study.” 

The altering of the data, which may be illegal, proceeded until March, according to the Asahi.

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