Country experience: Japan (Chapter 8)

Country experience: Japan

8.25.            The core data source for compiling statistics on international trade in services in Japan is the ITRS, which is regulated by the Foreign Exchange and Foreign Trade Act. Under the ITRS of Japan, all residents who make payments to or receive payments from non-residents under certain conditions^[1] must report their underlying transactions. Resident transactors must report their cross-border transactions to the Minister of Finance through Bank of Japan (BOJ). Transactions via non-resident banks are reported directly. 

8.26.            The information reported includes data on the transactor, the counterparty, the date, the type of payment (payment or receipt), the currency used, the value and the classification and description of the purpose of the transaction. For the last variable, reporters use a BOP classification code to report their purpose of transaction, choosing from a list of 186 BOP codes provided by ministerial decree, of which 61 relate to trade in services. 

8.27.            Under the Japanese ITRS, transactions that do not involve cash payments are required to be reported on a gross settlement basis. For example, if a resident imports and exports services under offsetting or netting arrangements, not only must the amount settled be reported, but also the underlying transactions on a gross basis. 

8.28.            The Japanese ITRS reporting threshold has gradually increased to a relatively high level (¥30 million). Therefore, a considerable number of transactions may be missing, especially small value service transactions. In order to estimate trade in services (other than transport and travel)^[2] below the threshold, Japan will start employing statistical methods consistent with BPM6. Empirical research suggests that the frequency of transactions increases exponentially as the value of transactions decreases. Statistically, a Pareto distribution fits the data well. Assuming that transactions below the threshold also follow a Pareto distribution, data below the threshold can be estimated. Those estimations are made on annual basis for each service item.

8.29.            Compared to using information on transactions from before a threshold increase, the Japanese approach to estimating below-threshold transactions is advantageous as the estimations can be updated periodically with recent data so that structural and price changes over time can be captured. Further, since the fit of the Pareto distribution is assessed on a regular basis, statisticians are able to choose another statistical approach if the implemented method does not fit the data.