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Japan Eyes Wider GDP Basket

Home renovation and movie production should be able to boost GDP.Home renovation and movie production should be able to boost GDP.

Japan seeks to broaden the scope of activities reflected in the country’s gross domestic product, factoring in technology and service-sector developments to increase the accuracy of the economic indicator.

A revised GDP could include activities such as car and home sharing as well as investment in intellectual property under the government’s proposed changes, a final report on which is due out Friday. The changes are expected to appear in an economic and fiscal policymaking plan to be compiled in June, Nikkei reported.

Today’s GDP cannot fully capture how the internet has reshaped the ways in which people live and corporations make money. A more accurate GDP could help the government develop better economic policy.

Film production is one area where the changes would apply. At present, only limited factors such as box office sales are factored into GDP. Production costs are treated as an expense, like parts and materials, and therefore subtracted from the added value of the output.

Under the government’s proposals, film production costs may be treated as investment starting in 2020, becoming partly reflected in GDP.

Another economic activity likely to be affected is home renovation, which has picked up thanks to the Bank of Japan’s policy of maintaining ultralow interest rates. The Japanese market for such work is estimated to surpass five trillion yen ($44.2 billion), but small-scale renovations of less than 10 sq. meters now are mostly excluded from GDP under the category of investment.

The industry is seen growing over the long term as a rising number of empty homes—due to a shrinking population—find new uses. Some observers say changing how renovations are counted would lift GDP by a few trillion yen.

When Japan refigured GDP calculations in December to treat research and development spending as a value-creating investment rather than a business expense, the change raised 2011 nominal GDP by nearly 20 trillion yen.

“Renovation and movie production will no doubt boost GDP as well,” said Taro Saito of the NLI Research Institute.

The government is also studying how to include the so-called sharing economy, in which people trade or rent out homes, cars and other property. But any discussions of this topic face the challenge of tracking deals cut between individuals via smartphone.

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