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Economy

Japan's wild GDP revisions stand out in G-7

After initially reporting growth of 0.2% for third quarter, Tokyo changes it to 1.8%

A beer production line at a Japanese brewery. Lagging capital investment figures are blamed for being the cause of Japan's big revisions to GDP figure.   © Reuters

TOKYO -- Japan's notorious habit of significantly revising gross domestic product figures from earlier assessments was on display Monday when it updated third-quarter numbers, renewing calls for a remedy.

GDP logged annualized real growth of 1.8% for the July-September period compared with the previous quarter, the Cabinet Office said, less than a month after pegging growth at just 0.2% in its first estimate. The jump is attributed to a clearer picture of a surge in last-minute purchases ahead of the Oct. 1 consumption tax hike.

Countries routinely revise their GDP data. But Japan stands out with its large revisions, data from the Organization for Economic Cooperation and Development shows.

Japan's real quarterly GDP figures changed an average 0.4 percentage point between initial estimates and assessments half a year later, the most among Group of Seven nations, an analysis of statistics from 2001 to 2018 has found. The rest all had averages under 0.3 point, with Italy boasting the smallest revision of 0.1 point. The U.S., whose data is closely followed by economists and investors, had an average of just 0.2 point.

The OECD has urged Japan to make its revisions smaller, according to an official in the international body's statistics department.

The biggest driver of changes in Japan's initial and revised figures is measuring capital spending, which accounts for nearly 20% of GDP. When GDP numbers are initially released, production data from the Ministry of Economy, Trade and Industry is used as an initial estimate. Ministry of Finance statistics, which include firsthand responses to quarterly corporate surveys, do not come out until a week before the first revision of GDP data, causing updated numbers to sometimes differ drastically from initial estimates.

Such discrepancies have prompted economists to question the accuracy of Japanese data. Real GDP growth for this year's April-June quarter, for instance, was initially pegged at an annualized 1.8% in August. It was then revised down to 1.3% in September, followed by a November upgrade to 1.8% before being lifted further to 2% this time.

In 2015, Japan even reversed its estimates, first saying that GDP contracted 0.8% in the three months through September but later changing the assessment to a 1% expansion.

The government has been weighing a statistics overhaul. But altering the data release schedule appears infeasible, given that corporate surveys require time for respondents to answer. Preliminary GDP figures need to be published promptly as well.

"There are speed-accuracy trade-offs, so this is not a simple issue," said Taro Saito of the NLI Research Institute.

Akiyoshi Takumori of Sumitomo Mitsui DS Asset Management showed optimism that improvements will be made, saying the system is in "a transitional phase."

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