Japan likely to revise proposed budget due to wage-data errors

Labor ministry officials have admitted issuing monthly wage data without meeting sampling standards for years. (AFP)
Updated 11 January 2019
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Japan likely to revise proposed budget due to wage-data errors

  • The data error has caused the ministry to underestimate payments made under Japan’s employment insurance program
  • Labor ministry officials admitted issuing monthly wage data without meeting sampling standards for years

TOKYO: Japan’s government is likely to revise its budget draft for the next fiscal year to pay for a shortfall of employment insurance benefits caused by errors in the country’s wage data, Finance Minister Taro Aso said on Friday.
The likely budget revision — a rare move — would follow the revelation that the labor ministry miscalculated workers’ average wages for years.
The data error has caused the ministry to underestimate payments made under Japan’s employment insurance program, which includes unemployment benefits, and another insurance covering compensation for workplace accidents.
Labor ministry officials admitted on Wednesday that they have issued monthly wage data without meeting sampling standards for years, hurting the credibility of a key gauge of the success of Prime Minister Shinzo Abe’s economic policies.
“Economic indicators provide the basis for decision on fiscal and economic policies and they must always be accurate,” Aso told reporters after a cabinet meeting. “It’s very regrettable that the wages data will be recompiled.”
Aso said the wage data flaw has caused the labor ministry to underestimate benefits for employment insurance and workpeople’s accident insurance. As a result, it needs to pay for additional benefits to make up for past shortfalls by adding necessary funds to the budget for the fiscal year to begin April 1.
“It’s highly likely that the budget draft will be revised,” Aso said, adding that the amount of extra spending has not been fixed yet.
In compiling the monthly data, which covers some 33,000 firms with five or more full-time employees, the labor ministry is supposed to collect samples from all the companies that employ 500 or more workers.
But it turned out that the data sampling failed to cover two-thirds of some 1,400 businesses in Tokyo for an unspecified period of time, ministry officials said. Domestic media reported the sampling error extends back for 15 years.
Chief Cabinet Secretary Yoshihide Suga said on Friday the government would examine all economic indicators.
The budget draft was compiled in December and was due to be sent to the parliament later this month for approval before April 1.
Abe’s cabinet last month approved a record ¥101.5 trillion ($937.12 billion) annual budget draft, featuring spending to offset the pain of a planned sales tax hike scheduled for October.


Energy Recap: The oil market wavers

Updated 12 min 1 sec ago
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Energy Recap: The oil market wavers

RIYADH: Oil prices went in different directions at the end of the week. Brent deteriorated to $67.03 per barrel and WTI rose to $59.04 per barrel, but both remain at four-month highs. 
Still, poor economic signals that added to the generally bearish mood did not manage to drive oil prices down because of the tightening global supplies that led the surprise drawdown in US inventories.
The 10 million barrels fall in US crude stocks was the largest drop since July 2018, due to a combination of strong exports and higher refining utilization. 
The reduced number of US oil rigs for a fourth week running sent drilling activity to its lowest in nearly a year.
The current level of oil prices does not reflect the market’s relatively strong fundamentals and supply tightness.
The Arabian Gulf sour crude grades have seen extensive buying activity with refiners securing spot cargoes in addition to their term cargoes.
Such high demand for the sour medium and heavy crude grades had Dubai crude in high demand.
Asian refiners are becoming increasingly concerned about the tightening supplies for the medium and heavy crude grade.
That is because many of them lack the flexibility to swiftly switch their refining systems to handle alternative light sweet crude grades that have low sulfur content. 
The market remains preoccupied with Iranian sanction waivers, which may be extended for another round of six months.
Given the tight oil market that has been further exacerbated by the sanctions on Venezuela, the second half of this year might experience further tightening.
The US is widely expected to continue extending the waivers for the key importing countries which are China, India, Korea and Japan. 
The a potential second round of waivers may not impact the market as much as last time in November 2018 when the price dropped by as much as $30 per barrel.
Helped by OPEC output cuts, the market has been stabilizing gradually even if not entirely recovering those early losses.
The current market appears too tight to be moved significantly by further waivers and should be able to absorb additional barrels — be they from Iran, Venezuela, Libya or the US.
Even with the last round of waivers, Iranian oil exports did not exceed 1.25 million barrels per day in February.

  • Faisal Mrza is an energy and oil market adviser. He was formerly with OPEC and Saudi Aramco. Reach him on Twitter: @faisalmrza