How much wealth is generated and accumulated in an economy? In order to enable international comparison, there must be an internationally agreed set of definitions of economic variables, such as "production" and "capital," as well as measurement rules acceptable to all. For this purpose, the United Nations (UN) provides a statistical framework called the System of National Accounts (SNA), which has been developed in cooperation with the Organisation for Economic Co-operation and Development (OECD), International Monetary Fund (IMF), and other organizations. Gross domestic product (GDP), which represents the value of goods and services produced in an economy, is one of the key indicators measured in the SNA.
In 2008, the SNA was revised for the first time in 15 years. The 2008 SNA, which contains a set of recommendations for national implementation, is a 700-page plus document. However, depending on the country, primary data needed for the implementation of the recommendations either may not be available or the implementation process may have to be carried out by only a handful of staff. Therefore, each country compiles and reports its national accounts based on its own statistical framework that is consistent with the UN SNA but takes into account its specific circumstances, i.e., the priorities in light of the given economic structure and the availability of primary data.
When countries report their national accounts for the latest year, they usually make some adjustments or corrections to historical data for the past several years. In contrast to such annual revisions, the benchmark revision is to redefine the entire data estimated in the past under the new standard of the SNA. This involves incorporating not only conceptual changes but also changes for improved accuracy, such as primary data and materials that have become newly available as well as modified estimation models.
Such a shift from an old underlying standard to a new one sometimes results in significant adjustments to historical data. When China conducted its first ever economic census in 2004, it resulted in a nearly 50% upward revision in service-sector GDP and 17% in entire GDP.
As for Japan, the term "JSNA," which refers to the Japanese System of National Accounts as distinguished from the UN SNA, has become fairly familiar and the government will start reporting JSNA data consistent with the 2008 SNA in December 2016. Though lagging behind the United States and Europe by a few years, Japan's implementation of the 2008 SNA comes with the incorporation of various accomplishments made by the Economic and Social Research Institute (ESRI), a research arm of the Cabinet Office, such as an improvement in the quality of long-term time series data and a greater scope and depth of information covered. All of this is the fruit of efforts made in accordance with the government's basic plan for the development of official statistics (Cabinet decision dated March 13, 2009), compiled after extensive discussions at the Statistics Commission as provided for under the Statistics Act as amended in 2007 for the first time in 60 years.
In the series of articles to follow, I will explain the implications of the forthcoming JSNA benchmark revision, in particular, for GDP statistics.
* Translated by RIETI.