Infrastructure ministry may have overstated construction orders by up to ¥5 tril. a year

The Yomiuri Shimbun

21:00 JST, May 13, 2022

A government panel investigating data tampering by the infrastructure ministry has estimated that construction orders were inflated by up to ¥5.1 trillion a year, according to sources.

The panel has found that integrated construction statistics used in gross domestic product (GDP) calculations have a margin of error of up to 0.6% as a result of the ministry’s tampering. However, the impact on overall GDP data is expected to be minimal.

Last December, the Land, Infrastructure, Transport, and Tourism Ministry was found to have overstated data from construction order surveys.

From April 2013 to March 2021, the ministry logged estimated construction order data for companies that failed to turn in monthly surveys and treated data consolidated over several months in subsequent surveys as the figure for the latest month. As a result, data was effectively being logged twice.

In January, a panel was launched to investigate the impact of the ministry’s tampering on the statistical data and explore ways to correct the data.

Some of the past surveys had been discarded, so the panel compiled estimates based on data from fiscal 2020, for which complete records exist.

Based on the panel’s estimates, the annual value of orders, which combines data from prime- and sub-contractors, was overstated by ¥2.8 trillion to ¥5.1 trillion, depending on the time period.

The annual value of construction orders over the period in question was about ¥80 trillion. Based on this, the tampering inflated the figure by 3.6-6.6%.

The impact was up to 5.3% for prime contractor statistics.

However, the margin of error ranged from minus 0.3% to plus 0.6% for integrated construction statistics, which are based on the results of construction order surveys and are directly reflected in GDP data.

The low figure is attributable to the method of calculation, which uses the value of orders received by prime contractors and the value of construction work undertaken.

According to the Cabinet Office, the construction sector accounts for about 10% of the nation’s GDP, and the integrated statistics reflect only a small portion of this.

The government expected the data irregularities to have a limited impact on GDP data, and the panel’s investigation seems to confirm such a view.

Before the end of the year, the ministry intends to revise the data on construction orders and integrated statistics on construction works for fiscal 2013-20 based on the panel’s report.