The labour ministry admitted this week that it has for years failed to collect complete data for its monthly employment report, which is closely watched as an indicator of wages and work hours.
The data helps determine various government benefits, including employment insurance.
Officials are supposed to gather data from all firms with 500 or more employees but in Tokyo, only about one third of 1,400 such firms were surveyed.
Local media said the scandal could date back more than a decade and a total of 53 billion yen ($490 millions dollars) would be repaid to 20 million workers.
“I have received a report from the labour and welfare ministry that they need to provide employment insurance and other payments retroactively,” top government spokesman Yoshihide Suga told reporters.
“We will make adjustments to make a necessary budget allocation in the fiscal 2019 budget” for the year starting in April, he said.
He gave no details on how much would need to be repaid, and added that the government was now probing dozens of other major data sets.
The labour minister has admitted he received a report about the problem as early as December 20.
The ministry nevertheless went ahead and published data on December 21 and January 9 that it knew had sampling problems, raising questions about the reliability of official statistics in the world’s third-biggest economy.
The monthly labour survey has been watched by the government and the Bank of Japan as a clue for their economic policy decisions.
Suga said it was “extremely regrettable” that confidence in the survey was shaken.