Miscounted Beans: Japan's GDP Flub

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May 25, 2000 - 02:07 PM

Miscounted Beans: Japan's GDP Flub Reveals Weak Number-Crunching By Scott Stoddard Associated Press Writer

TOKYO (AP) - Japan's economic mandarins were stumped. While revising the country's dismal growth numbers for the final three months of last year, they came across some inexplicable data on capital spending that would have made the situation look even worse.

So they left the data out.

The government's recent admission that it omitted the spending data while compiling some of the world's most closely watched economic measurements underscores a perennial problem Japan's economy: unreliable statistics.

The main problems for Japan, analysts say, is a dearth of bureaucrats trained specifically in statistics and a lack of oversight to make sure that numbers for the world's second-largest economy are crunched correctly.

"The data quality is extremely poor and they constantly find themselves with the need to make big revisions," said Brian Rose, senior economist at UBS Warburg Securities in Tokyo.

While such problems also occur in other countries, Japan's economic numbers are examined especially closely worldwide for signs that the country is recovering from a decade of malaise.

And Japan's Economic Planning Agency couldn't have fudged a more closely watched figure: gross domestic product.

The government originally announced that GDP - the main measure of economic growth - dropped 1.41 percent the October-December quarter of last year.

That statistic was bad enough. But when EPA officials were working on their first revision, they came across a startling number. A previous survey of capital investment by Japanese banks, brokerages and other financial institutions found a drop of 3 percent for the quarter, a subsequent poll showed a massive 37.7 percent plunge.

Japan's top bean-counters suspected they had made a mistake.

"The discrepancy was so big, we weren't sure we could rely on the data," said Masaaki Maruyama, head of the EPA's national expenditures division. "So we decided to leave it out."

The limited revision left Japan with somewhat less ominous GDP numbers. The revised GDP for the quarter announced on May 11 had the economy shrinking by 1.43 percent. Including the capital spending plunge would have pushed that number up to somewhere between 1.6 percent and 1.7 percent.

The worse-than-expected figures will make it more difficult for the government to meet its goal of 0.6 percent GDP growth for the fiscal year that ended on March 31. But officials and analysts say that political gain was probably not a factor in the decision.

Though the unpopular government of Prime Minister Yoshiro Mori is heading into elections on June 25, the revision of the figure either way is not seen as a factor that would influence the way many Japanese would vote.

The problem instead seems to simply show the bureaucracy needs better training. Statistics gathering is a low priority in the national budget, and finance officials typically stitch together data culled from various ministries that might not be optimum for calculating GDP, critics say.

"It's a difficult job trying to piece together the garbage they have to work with," said Rose. "This situation has gone on for decades."

But some economists point out that other countries, including the United States, where there is no shortage of professional economists trained in statistics, also have trouble getting the numbers right.

"There's bad data in every country," said Jesper Koll, chief economist at Merrill Lynch in Tokyo. "With Japan or any country, look at the number of revisions."


-- Martin Thompson (mthom1927@aol.com), May 25, 2000

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