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Nikkei Editorial

Why Japan's faulty economic statistics are dangerous

The government must quickly clear up the matter to restore the public's trust

Labor Minister Takumi Nemoto apologizes for the survey debacle. (Photo by Kei Higuchi)

Dodgy statistics released by the Chinese government have sown considerable doubt among foreign investors and economists. Although the context is hardly comparable, Japan has its own problem with government data that threatens to shake the public's trust.

It has been revealed that the Monthly Labor Survey -- which mainly tracks how much employees are paid and how many hours they work -- has not been conducted in accordance with official guidelines, resulting in the release of inaccurate data to the public.

This is no small thing: The data collected for the survey, conducted by the Ministry of Health, Labor and Welfare, forms a cornerstone of the country's official statistics. It is used, for example, to determine the size of the benefits paid under unemployment and industrial accident insurance. Salary and wage data is not only closely watched as a key indicator of personal income and consumer spending, it is also used to assess the effects of government policies. The ramifications of faulty numbers are therefore enormous.

The government recently took a close look at all 56 key statistics compiled by ministries and agencies and found irregularities in how the data was prepared for 40% of them. In some cases, for example, data that should have been included was left out.

Under the official guidelines for the Monthly Labor Survey, data must be collected on all companies with 500 or more employees. It was discovered, however, that of the roughly 1,400 companies in Tokyo that qualified, only about 500 were surveyed.

Leaving out larger businesses, which generally offer higher pay, made the official figures for salaries and wages smaller than they actually were. The ministry estimates that a total of about 20 million recipients of unemployment or industrial accident insurance have been underpaid. Not only should the government pay those people what they are owed, it should also clearly and fully explain how this problem happened.

Though the ministry has published a report by a third-party committee that looked into the labor survey debacle, many questions remain unanswered. For example, the report said that in 2004 the survey on large corporations in Tokyo switched to a sample-based formula -- instead of gathering information from all relevant companies -- at the request of the local government and others. But the investigative committee did not ask the Tokyo Metropolitan Government why this change was made.

It was also found that, as a result of the faulty surveys, the growth rate for salaries and wages, or nominal pay, from 2012 onward had been padded by up to 1.2 percentage points. This raises questions about whether ministry officials intentionally tampered with the numbers.

There's more. It has come to light that the third-party investigative committee in fact left some of the questioning of ministry officials to ministry staffers, and that ministry employees drew up the original draft of the panel's report. Unsurprisingly, the original report was widely blasted by lawmakers in parliament. Takumi Nemoto, the minister of health, labor and welfare, said the hearing survey will be redone.

With the industrial structure undergoing so many changes, statistics that accurately reflect the real state of the economy are more important than ever. We hope this issue serves as a wake-up call to Japanese ministries and agencies about the significance of economic data.

This is not the first time the government of Prime Minister Shinzo Abe has faced a scandal of this kind. The Ministry of Finance was found to have falsified official documents, for example, and daily logs kept by the Ground Self-Defense Force in South Sudan were covered up. To avoid further undermining the people's trust in the government, Abe and his team need to do everything in their power to prevent a repeat of such statistical irregularities.

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