TOKYO -- The news that Japan's labor ministry published erroneous statistics has raised suspicions about the accuracy of economic analysis released by the Bank of Japan.
The ministry on Wednesday revised its monthly labor survey for the period between 2012 and 2018. It overstated nominal year-on-year wage increases by as much as 0.7 percentage point between January and November of last year, to take just one example.
The country's central bank uses statistics from the labor ministry to compile two key pieces of economic data.
One is the quarterly output gap, a gauge that compares the nation's supply capacity with total demand. Supply capacity is derived from elements such as labor and capital spending. Data from the labor ministry survey, such as the number of hours logged by the workforce, is used to compute the output gap.
Japan's output gap has climbed further and further into positive territory. That has partially informed the BOJ's judgement that "Japan's economy is expanding moderately." The gap is also considered a leading indicator for inflation. A sustained positive reading could lead companies to raise prices and lift wages.
The consumer price index that excludes fresh foods currently stands below 1%. Nevertheless, the BOJ says prices are maintaining momentum toward its 2% inflation target, with the conclusion based in part on the output gap.
Now, the BOJ could face pressure to rework its estimates in light of the data scandal. "With regard to the extent of the impact, we intend to undertake a careful examination based on upcoming results of government studies," said a BOJ spokesperson, who offered few other details.
The services producer price index, released monthly, is the second key BOJ indicator reliant on the labor survey. If the BOJ is forced to drastically revise either this indicator or the output gap, it could introduce uncertainty about the conclusions reached by the central bank, an essential gatekeeper for inflation.
"There is no telling how far the impact has spread," said a senior BOJ official.
In the BOJ's quarterly Outlook for Economic Activity and Prices, at least eight out of roughly 60 diagrams incorporate data from the labor survey. Those include charts depicting individual income, nominal wages and consumer spending. The latest report, released Wednesday, describes a "steady improvement in the employment and income situation."
The outlooks are considered valuable since they are based on the conclusions about the economy and prices reached by BOJ Gov. Haruhiko Kuroda and other officials during monetary policy meetings. The central bank may see no need to revise earlier statements, but the reliability of the body risks being thrown into question regardless.