The Japanese System of National Accounts (JSNA) and Related Challenges

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1 The Japanese Sysem of Naional Accouns (JSNA) and Relaed Challenges (For ESRI meeing on he JSNA, March 24, 2005) Deparmen of Naional Accouns Economic and Social Research Insiue, Cabine Office of Japan

2 1. Recen conex of JSNA compilaion Srucural change in he economy - IT revoluion during he laer half of he 1990s Low economic growh afer he bubble burs Re-examinaion of Japan s saisical sysem - Major concerns abou he reliabiliy of economic saisics Inernaional rends - Increasing adopion of chain indexes - Furher developmens in he U.S., Canada, and Europe 1

3 2. More demands on JSNA More comprehensive and updaed conceps o show a broad range of aciviies in he economy More accurae measures of economic growh More imely and deailed esimaes o give useful informaion for policymaing More comparable o inernaional figures 2

4 Recen developmen of JSNA Augus 2002 Inroducion of new flash esimaes April 2004 Se-up of new Advisory Commiee December 2004 Inroducion of a chain index Around he end of 2005 Benchmar revision (new benchmar year will be 2000) Prioriy issues (see 17) 3

5 The new esimaion of quarerly GDP (Augus 2002) (1) Incorporaion of supply-side daa The new mehod uilizes enriched supply-side daa, especially concerning he service secor, and supplemens he expendiurebased QE using such daa. The household survey has had some difficulies in achieving an accurae picure of consumpion expendiure (expendiure for expensive goods, increasing single families). Consancy wih annual esimaes (use of supply-side daa only) (2) Earlier release Before Augus approximaely 2 monhs and 7 days Afer Augus approximaely 1 monh and 2 wees cf. U.K wees U.S. + 1 monh Germany, France + 1 monh and 2 wees Canada + 2 monhs 4

6 Char 1 Image of New Esimaion of QE Curren Survey of Producion, IIP, Monhly Labor Survey, Monhly Economic Repor on Land Infrasrucure and Transpor, Survey of Seleced Service Indusries, WPI Balance of paymens, Trade saisics Weigh of nominal value for expors and impors, gross fixed capial formaion, and consumpion of households are used. Consumpion of households (Parallel esimae iem) Toal domesic supply Gross Capial Formaion Expors & Impors Change in invenory Quarerly Financial Saemens Saisics of Corporaions, Curren Survey of Commerce, IIP Supply-side esimaes Inegraed value (Consumpion of households) (Parallel esimae iem) Gross Capial Formaion (Excluding privae housing invesmen and public invesmen) Inegraed value (Privae non-residenial invesmen) Consumpion of households (Common esimae iem) Commodiy & noncommodiy sales, Direc overseas purchase (ne) Consumpion of households Family Income and Expendiure Survey, Quarerly Financial Saemens Saisics of Corporaions, Inegraed Saisics on Consrucion Wor, Building Consrucion Sared, ec. Balance of paymens, Trade saisics Consumpion of households (Parallel esimae iem) Privae housing invesmen Demand-side esimaes Public invesmen Public non-residenial invesmen Public invenory Privae invenory Consumpion of NPISH Expors & Impors Governmen consumpion Nominal values Deflaor Real values Price indices Seasonally adjused values 5

7 Flow of esimaion Reference 1 Concep char of supply-side esimaion Invenory N=1 Finished Goods Wor-inprogress C N=90 <Quarerly> Domesic shipmen value saisics (producer's price) Commodiy-flow 8-digi basis (annual) Commodiy-flow 90 classificaion basis daa (annual) N=1-6 Agriculure N=7-10 N=1 N=1 N=1 N=1 N=1 N=1 N= Wolesale and Reail Trade N=11 Raw maerials Manufacuring and Supplies allocaed o - - each goods N=60 N=64,65(commerce) N=70-74(ranspor) N= N=58 N=58 N=58 N=59 onsrucion (Noe) N=60 N= N=90 # cos freigh comerce Impors (C.I.F price) A N=90 1 o 90 Toal Expors B N=90 1 o 90 Toal Freigh/margin # Cos freigh/com merce N=89 Invenory - C <Quarerly> Toal domesic supply (producer's price) = N=90 Commodiy-flow 90 classificaion basis daa (annual) Esimaes of qurerly demand iems F Household consumpion D N=90 NPISH Capial formaion E N=90 Privae non-residenial inves. Privae housing inves. Public capial formaion H Governmen G Governmen porion I NPISH Saisics used Cecsus of Manufacures IIP Deflaor - Saisicals Repor on agriculure/foresry/fishery (monhly)20 iems adoped - Curren Survey of Producion (monhly)500 iems adoped - IIP(monhly, 35 secors adoped) WPI(monhly, 42iems adoped) - Curren survey of seleced service indusry (monhly, 60 iems adoped) Summary of foreign rade (monhly) Balance of paymens (monhly) (service) Curren Survey of Commrece Deflaor Census of Commerce Quarerly GDP = (sum of B o I)-A Noe: Consrucion is exendedly esimaed from he preceding year's commodiy-flow values using as basic saisics sum of inermediae consumpion by goods(n = 1 o 90) and value added Quarerly Financial Saemens Saisics of Corporaion (2nd QE) (as forquaniaive daa muliplied by CPI,WPI ec.) Quarerly Financial Saemens Saisics of Corporaion (2nd QE) 55

8 JSNA review framewor The Advisory Commiee for Naional Accouns Subcommiee for Benchmar Revision Subcommiee for FISIM Subcommiee for Capial Socs Subcommiee for Sysem Developmen 5

9 Adopion of chain indexes Bacground o he inroducion (Figs. 2 and 3) - Plummeing prices of IT goods and services - Inroducion of he hedonic approach ino price indexes - The convenional benchmar revision oo place every five years (10- year delay a maximum). - The so-called subsiuion bias has probably increased in his IT-led recovery. Effecs of he inroducion (Figs. 4, 5, 6, and 7) - The fixed-based year mehod (baseyear=1995) Chain indexes (Laspeyres/Paasche ype) based on previous years (reference year=2000) - Inroducion almos one year earlier - Smooh ransiion (welcomed by users) Comparison of differen chain-ype indexes (Figs. 8, 9, and 10) 6

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17 Fig. 8: Differen index formulae Annual volume index Quarerly volume index Annually chain-lining Laspeyres volume index LV P Q = 1 LV 1 P 1Q 1 LV P Q = 1 LV 1 P 1Q 1 Quarerly chain-lining Fisher volume index FV = FV P Q 1 1 P 1Q 1 PQ PQ 1 FV = FV P Q 1 1 P 1Q 1 P Q P Q 1 Annually chain-lining Fisher volume index FV = FV P Q 1 1 P 1Q 1 P Q P Q 1 FV = FV P Q 1 1 P 1Q 1 P P Q Q 1 (Noe) P : Price of each iem for he h quarer of year Q : Quaniy of each iem for he h quarer of year LV, FV : Laspeyres and Fisher volume indexes for he h quarer of year 14

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20 3. Prioriy issues for JSNA Applicaion of chain-lining sysem - Chain-lined GDP (producion approach) Exension of accouns - Produciviy measures and FISIM Reexaminaion of conceps and mehods - Review of capial soc esimaion - Qualiy of raw daa More deailed descripion Beer communicaion wih users - Especially wih inernaional media and users 17

21 Examples: Typical foreign percepion of JSNA Sudy cass cold ligh on Japan s growh rae FINANCIAL TIMES, May 25, 2004 Technical problems wih he way he GDP deflaor is calculaed, some of which will be correced nex year, mean official numbers overesimae he rae of price falls. Is Japan s resurgence for real? TIME, Ocober 6, 2003 Scrach beneah he surface on some of he headline-maing numbers and Japan s mini-miracle quicly sars o loo a bi conrived many of hose who have scruinized he governmen s economic-growh esimaes don acually believe hem. Saisical fog has radiionally obscured developmens in Japan more han elsewhere. Press Briefing a he OECD, February 17, 2005 The revision said more abou he noorious volailiy of Japanese GDP numbers han abou he real sae of he economy. FINANCIAL TIMES (FT.com), March 14,

22 4. Remaining challenges How do we overcome conflic beween accuracy and sabiliy? Much earlier publicaion of flash esimaes Advanages and disadvanages of concurren seasonal adjusmen Frequen and immediae revisions o source daa Wha is he bes pracice for communicaing wih users and he media? Especially for inernaional users and media How do we esablish more producive collaboraion wih oher source suppliers? More effecive feedbac mehods 19