CATASTROPHIC NATURAL DISASTER AND NATIONAL ACCOUNTS: JAPAN’S EXPERIENCE Working Party on National Accounts, OECD, Paris October, 2011 Kosuke SUZUKI Department of National Accounts Economic and Social Research Institute Cabinet Office of Japan

OUTLINE OF THE GREAT EAST JAPAN EARTHQUAKE Occurred at 2:46 pm (JST) on 11 March Epicenter: ｔ he northeast of Japan Seismic scale: M 9.0 The extent of damage Around 20,000 are dead or missing More than 70,000 are still living in temporary shelters. Amount of damage in tangible assets: 16.9 trillion yen ($ 220 billion) cf. Japan’s nominal GDP in 2010: 479 trillion yen 2

OUR CHALLENGES: PAST AND FUTURE Source data problems Delay Missing Modification in compilation methodology Projection Adjustment Scope Conceptual issues Treatment of unusual economic transactions User Communication 3

SPECIAL TREATMENT IN QUARTERLY NATIONAL ACCOUNTS: OVERVIEW Quarterly National Accounts in Japan GDP (expenditure side), its components, and compensation of employees Release schedule Advance estimates: after approx. 1 month and 2 weeks Revised estimates: after approx. 2 months and 10 days Advance GDP estimates for the first quarter of 2011 were due out on 19 th of May… 4

SPECIAL TREATMENT IN QUARTERLY NATIONAL ACCOUNTS: PROJECTION Mechanical projection in the advanced estimates In advanced estimates, some data for the third month of the reference quarter cannot be obtained. Huge deviations were obviously expected… WE NEEDED to maintain the accuracy of our estimates and to avoid a later big revision. Usage of alternative data Other proxies Data published by private business associations Anecdotal information 5

FIGURE 1: UNPRECEDENTED FLUCTUATION IN SOURCE DATA An illustration: Sales of Amusement and Theme Parks (Source) “Survey of Selected Service Industries” (METI). Trend estimate is calculated by author. 6

FIGURE 2: REVISION TO THE ADVANCE ESTIMATES Comparison of growth rates for Q （ Changes from previous quarter, %, seasonally adjusted, chain volume ） Advance estimatesRevised estimates Gross Domestic Product-0.9 Private consumption-0.6 Private residential investment0.7 Private non-residential investment Private inventory (*) Government consumption Public investment Public inventory (*)0.0 Exports0.7 Imports (Note) Figures for inventories are contributions to GDP growth rates. 7

SPECIAL TREATMENT IN QUARTERLY NATIONAL ACCOUNTS: SOURCE DATA Revised GDP estimates are calculated using “Financial Statements Statistics of Corporations by Industry” (FSSCI, Ministry of Finance). Investment and inventory series Revised GDP estimates were due out on 9 June. Delay in FSSCI publication Provisional results for Q1: 2 June Final results for Q1: 29 July Adjustment in investment estimation Revision to private investment: -1.3% → -1.4% 8

SPECIAL TREATMENT IN QUARTERLY NATIONAL ACCOUNTS: OTHER ISSUES Adjustment in parameters Work-in-progress of housing construction, etc. Conceptual Issues Example: clearance of rubble User communication: advance announcement Timing 27 April for the advance estimates (published 19 May) 1 June for the revised estimates (published 9 June) Contents 9

ISSUES FOR ANNUAL ESTIMATES Annual National Accounts in Japan Fiscal year: from April to March of next year Released in winter of next year Estimates for Fiscal 2011 will be due out in December 2012/January 2013 Items we need to tackle: Source data problems Reconsideration of estimation methodology/scope Example: treatment of “transfers” Conceptual issues Example: estimation of nonlife insurance services 10

IMPLICATION/ISSUES FOR DISCUSSION Good opportunity to review current estimation framework Dealing with source data problems Adjustment in estimation methods Revisiting conceptual issues There is also a need to consider data sources and estimation methods for new items. Improvement in public relations Conceptual issues: some borderline cases Are benefits in kind to victims collective or individual consumption? 11