Re: Quantifying Values: response to Alan

Iwao Kitamura (ikita@ST.RIM.OR.JP)
Tue, 20 Jan 1998 17:22:04 +0900

"jurriaan bendien" <> wrote:

> I don't have the documents here, but from memory in the SNA system they
>can't really decide on their treatment of banking activity in GDP, and
>create an oddity called a "nominal bank charge" or "nominal industry" which
>is formally first included and then deducted again (?) in the calculation
>of GDP. It's a decade ago since I worked on that particular problem, and I
>cannot recall now the precise details of the conceptual issues involved. I
>would need to look at it again, but my hunch is that interest receipts and
>rent payments (other than the owner-occupied housing imputation) were not
>supposed to be included in GDP calculated to SNA standard, I think on the
>ground that they were conceptually unrelated to (the value of) SNA-defined
>"production", hence also not part of value added. (Someone else familiar
>with UNSNA may know the details of that story). Whereas I wanted to argue
>that annual net interest receipts are part of value added.

The change of treatment of the net interest received by banking sector is
the important change of 1968 SNA comparing to the old SNA (1953).
As I understand, interest margin (interest & devidend receipt - interest
payment) by banks (financial institutions) is not excluded from "production"
as inputed bank service charge (interest) in SNA. But they treat this as
intermediate input consumed in industry and count this as costs in aggregate
industry sector. So the operating surplus of financial institutions is usually
counted as plus in production accounts and minus(!) in income and outlay
accounts as they substract the amount from operating surplus of financial
institutions in income and outlay accounts.
In the case of Japan, this imputed interest amounts to 4% of GDP.(see
following table) This cannot be ignored for estimating value produced.

(Japan) income and outlay accounts
Financial Institutions

Calendar Year
(Thousand million Yen)

Item 1995

1. Property income 93,605.5
1) Interest 85,487.0
2) Dividends 7,906.4
3) Rent 212.1

2. Net casualty insurance premiums 177.2
3. Casualty insurance claims 4,357.0

4. Direct taxes 2,667.1
1) On income 2,632.9
2) Not elsewhere classified 34.2

5. Fines and penalties 27.3
6. Unfunded employee welfare benefits 1.4
7. Current transfers not elsewhere classified(net)
8. Saving 903.3

Disbursements 104,673.8

9. Operating surplus -14,715.2
10. Property income 114,854.4
1) Interest 111,845.9
2) Dividends 3,008.5

11. Casualty insurance claims 176.3
12. Net casualty insurance premiums 4,357.0
13. Unfunded employee welfare contributions imputed

Receipts 104,673.8

(cf) Imputed bank service charge 20,818.4

I agree with Jurriaan that this imputed interest has to be counted
as value-added (in our concept) in the current period.
The old SNA treated this as production and purchased by industry and
household. The amount purchased by household is added to household
consumption and to household income. So this part is counted as value
added in old SNA. I/O table of Japan still adopts this manner.

Happy New Year!