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POLITICS

GDP data calculation method to be changed

  • 2016-01-04 15:00:00
  • , Mainichi
  • Translation

(Mainichi: January 4, 2016 – p. 2)

 

 The method of calculating the quarterly gross domestic product (GDP) will be changed from the second preliminary estimate for the July-September period to be issued in December. The expectation is that that the GDP will be increased by about three percent because R&D costs will be counted in the estimates. There is a possibility that the change in the GDP data calculation will become a driving force for the Abe Shinzo administration to achieve its nominal GDP goal of 600 trillion yen.

 

 GDP is calculated based on the United Nation’s System of National Accounts (SNA). As the SNA was reviewed in 2008, the government has been preparing for the introduction of new standards. With the adoption of new standards, the U.S.’s GDP rose over three percent; Britain’s, around two percent; and Australia’s, around 1.5 percent.

 

 The major reason for the increase is the inclusion of “R&D costs” of companies as capital investment. Although the R&D costs are now excluded from GDP, they will be recognized as “investment” that will create additional value by revising the standards. As Japan spends much money for R&D, it is viewed that “the GDP will be boosted by about three percent,” said a Cabinet Office official. Moreover, patent royalty and commissions to real-estate agents will be added to GDP.

 

 The Abe administration has set the nominal GDP goal of 600 trillion yen around 2020. The GDP is forecast to reach 503 trillion yen in fiscal 2015. If the effect of the additional three percent (15 trillion yen) is realized, the nominal GDP will be 518 trillion yen. The realization of the government’s nominal growth rate of three percent will boost GDP to 600 trillion yen in FY2020. However, since Japan has not achieved growth of three percent for over 20 years since 4.9 percent figure in 1991, the goal of a GDP of 600 trillion yen by 2020 will remain difficult to achieve.

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