40% of Japanese economic data is erroneous

Years of growth, trillions in government bonds, and substantial capital sought from outside investors may see a U-Turn in the coming days as Japan’s prized economic policies were found to be reliant on fraudulent data. As per estimates, over 40 percent of Japan’s 56 economic policies contain errors, casting a shadow on all of the country’s analysis and reports generated over the years.

Research methodologies – for all their benefits – suffer from a critical point-of-failure; that of sampling a small set of respondents and basing conclusions on limited, oft-skewed responses. And it seems like an integral division of Japan’s economic policymakers did not catch a drift of this false methodology until recently. Officials of the country’s Labour Ministry were found to survey only a third of Tokyo’s large businesses – those with 500 employees and more – to collate a data model for detailing all of Japan’s growth. But such firms typically pay the average worker more than the average small or medium-sized enterprise, meaning wage estimates have been remarkably far-off.

Labour officials have agreed their blunder has cost 19.7 million people over $490 million (53.7 billion yen) in unpaid benefits. Add to this the cost of updating computing systems to rectify the error, and Japan faces a colossal $759 million (79.5 billion yen) bill in damages. The BoJ is heavily dependent on the Labour Ministry for over sixty of its growth diagrams, including nominal wages, individual income, consumer spending. While latest reports last week show – and have been showing – positive growth and increased spending, a lot of recalculations are in order before Cabinet elections in March 2019. Once again, (central) bankers have proved to be responsible for a colossal mess in analyzing critical growth figures, income rates, and creating a reliable model to trust. But it seems like Japan’s envied growth rates extending from far ago may have been gross overestimations all along.

A Scandal Unfolds: Japan’s Impressive Growth Rates Were a Lie; 40% of Economic Data Faked, CCN, Jan 29