Japan PM climbs down on contentious labor reform after data flaws

TOKYO, March 1 (Reuters) - Japanese Prime Minister Shinzo Abe has abandoned for now a key labor law reform aimed at boosting productivity after admitting data used to support the change was flawed, an embarrassing political climb-down likely to disappoint businesses and investors.

Abe had pledged to pass in the current session of parliament, set to end in June, a package of reforms to increase labor market flexibility and allow a more efficient allocation of resources, a core part of his "Abenomics" recipe for growth.

But after weeks of defending the reforms against opposition attack after the government admitted some supporting data was flawed, Abe confirmed on Thursday that one of the most contentious parts of the package would be dropped for now.

The change would have expanded a system of "discretionary labor" where employees are regarded as having worked a certain number of hours and paid a fixed wage regardless of how long they actually work. The flawed data related primarily to this proposal.

"Weve decided to delete every single element of discretionary labor from the reform bills at this time and have the labor ministry grasp the actual situation once more, and then to debate over again," Abe told the upper house budget committee, confirming remarks to reporters late on Wednesday. (Reporting by Linda Sieg and Tetsushi Kajimoto; Editing by Sam Holmes)