Tokyo is reeling from a scandal involving skewed data that has upended official readings of the economy and cast doubt on a pillar of Prime Minister Shinzo Abe’s economic program.
The labor ministry is required to collect data from all companies with 500 or more employees for its Monthly Labor Survey. But from 2004 to 2017, it surveyed only about one-third of these large businesses in Tokyo. Because large companies typically pay more than smaller ones, the sampling error dragged down wage estimates across the country.
photo credit to: https://www.cfr.org
The ministry has acknowledged that the faulty survey data cost 19.7 million people about 53.7 billion yen ($490 million) in unpaid benefits. That, plus updates to the ministry’s computer systems to correct the problem, will raise the cost of the foul-up to about 79.5 billion yen.
The lapse prompted a broader investigation of Japan’s 56 key economic statistics, which revealed that 40% of them contain errors. A group of specialists will examine all of the government’s 233 data series.
The scandal has also raised questions about government economic assessments, undercut wage inflation expectations and left Abe vulnerable to criticism from rivals ahead of an election scheduled for this summer. It has also forced revisions to some of Japan’s key economic data.
The Abe government is scrambling to clean up the mess. Earlier this month the cabinet added an extra 650 million yen to the budget for the next fiscal year to cover the cost of the blunder. Twenty-two officials, including Labor Minister Takumi Nemoto, were punished.
But deeper concerns linger. Officials corrected the survey methodology last year, meaning that wages appeared to jump significantly compared with 2017. With the revisions applied to previous years, however, last years pay hikes were shown to be less dramatic.
Wage growth, a key part of meeting the Abe government’s 2% inflation target, was revised down for the first 11 months of 2018. Before the data was corrected, pay in June 2018 was seen as having grown by 3.3% on the year; that figure was cut to 2.8%.
Reference: Abenomics under pressure as Japan’s data scandal spreads
