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BOJ seeks more accurate measure of Japan's economic growth
[TOKYO] The Bank of Japan is looking to make its own calculation of economic growth as it seeks a more accurate and timely gauge of the economy's health, according to people familiar with the matter.
The calculation will draw on consumption data the government started releasing earlier this year amid increased scrutiny over the reliability of Japanese economic statistics. The consumption figures have been at the centre of a long-running tussle between the BOJ and the government over the latter's calculation of gross domestic product, including large revisions.
The likely move comes amid lingering speculation that weak economic data could nudge Prime Minister Shinzo Abe to postpone a sales tax increase for a third time. While GDP data for the first quarter showed unexpected growth, cooling talk of a postponement for now, revised figures due next month may show the economy is actually in a more anemic state, reigniting speculation.
Big revisions present a challenge to policy makers. When Mr Abe made the decision to postpone the sales tax hike in November 2014, initial figures released the previous day showed the economy shrinking 1.6 per cent in the third quarter. The most recently revised figure for that quarter shows the economy actually expanded 0.3 per cent, a figure that might have led to a different decision from Mr Abe.
Data released Monday showed that annualised growth for each quarter from 2010 was on average 0.43 percentage point higher in revised figures compared with preliminary data. That figure is high considering Japan's potential growth rate is seen as less than 1 per cent. A 2015 study found Japan's changes to year-on-year economic growth figures after a three-year period were the second largest out of 18 OECD economies.
The BOJ wants to use more supply-side data in its calculation of consumer spending than the government does, according to the people. The Cabinet Office started releasing its consumption data five working days after issuing preliminary GDP figures in March. While it won't take the BOJ long to make its own GDP estimate the bank hasn't decided whether it will make it public, the people said.
If the central bank's calculations come closer to revised figures than preliminary figures, that suggests its figures will tend to give a higher reading of growth that offers less justification for the BOJ to support the economy with its limited array of policy tools.
It's not the first time the BOJ has come up with its own estimate of economic indicators. The BOJ's own measure of Japan's output gap-a measure of excess demand in the economy-as tended to give a stronger result than the government's figure. The BOJ's output gap was at 2.2 per cent in the final three months of last year while the Cabinet Office's reading was zero.