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<html><body><div><p><em>Tim Hornyak is a Tokyo-based journalist.</em></p><p>In March 2025, Toyota Motor subsidiary <a href="https://asia.nikkei.com/Business/Automobiles/Hino-Motors-woes-persist-as-merger-talks-with-Mitsubishi-Fuso-resume">Hino Motors</a> pled guilty in the U.S. to a long-term fraud scheme under which it had faked engine emissions data going back to at least 2003. The Justice Department's punishment was harsh: a $1.6 billion penalty and a five-year probation barring it from importing diesel engines.</p><p>The punishment in Japan? A transport ministry corrective order issued to Toyota Motor, which was embroiled in a wider falsification scandal.</p><p>Sadly, Hino's cheating is far from being an isolated case. Despite Japan's long-held reputation for craftsmanship and high-quality products, fraud is not unusual among makers in industries ranging from food to transport.</p><p>But corporate fraud is no joke -- it can represent a real danger to society. In one of Japan's worst fraud cases, at least 28 people died and at least 400 were allegedly injured after Takata produced airbag inflators with dangerous defects, according to the U.S. National Highway Traffic Safety Administration. And like Hino's coverup, the company reportedly knew about it for years. It fits a pattern of scandals.</p><p>To recall a few recent ones: In 2024, Toyota, Honda Motor, Mazda, Yamaha Motor and Suzuki Motor all admitted to cheating on testing data or improper testing. Keio Heavy Equipment Maintenance admitted to faking data on over 1,700 train wheelsets affecting 29 rail operators in a scheme going back at least eight years, Japan Freight Railway Company said it falsified maintenance work data for at least a decade, and Kawasaki Heavy Industries admitted it fudged fuel-efficiency data on ship engines for more than 20 years. In 2023, Toyota unit Daihatsu Motor copped to fabricating safety data on 64 models for more than 30 years.</p><p>In 2022, there was a literal version of this shell game when Kumamoto producers of asari shortneck clams were caught passing off lower-priced Chinese and South Korean clams as Kumamoto produce. That in turn was a throwback to 2013, when over 300 food providers were involved in a mislabeling scandal in which higher prices were charged for lower-quality or non-Japanese products, for instance processed beef injected with fat and labeled as wagyu beef.</p><p>To meet consumers' exacting demands, "made in Japan" often means higher production standards and better quality compared to many other countries, but it also gives makers more room to cut corners.</p>        
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                        In the 2017 Kobe Steel fakery scandal, about 500 companies were supplied with products that did not meet standard.



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<p>In both the transport manufacturing and food production industries, the causes of fraud are similar. Regulators in various levels of government are compartmentalized and quality-control staff in the private sector are sidelined in the pursuit of production schedules and lower costs. The unspoken pressure to maintain output is even harder to resist in the traditional pyramidal structure of Japanese organizations.</p><p>"When an engineer cannot clear performance goals, he has to falsify the product performance," says Takashi Yasuoka, a former professor at Shibaura Institute of Technology and the author of several books on fraud in Japan. "Hierarchical relationships between bosses and subordinates, manufacturing departments and inspection departments result a disparity of voice. This culture is a hotbed of quality fraud."</p><p>Auditors have not solved the problem. In the wake of the 2017 Kobe Steel fakery scandal, in which about 500 companies had been supplied with products that did not meet standards, quality management consultant Christopher Paris noted that in fraud schemes involving it and seven other large Japanese makers, the one thing they had in common was auditing by ISO 9001 certification bodies overseen by the Japan Accreditation Board. Paris claimed it was shirking its responsibility.</p><p>It's been a decade since Japan introduced the 2015 corporate governance code in the wake of the Olympus bookkeeping scandal, but whether this has put a dent in corporate malfeasance is questionable. Probes have suggested that at companies like Daihatsu, instances of wrongdoing apparently increased after the government toughened its stance against bad behavior and the firm cut corners because of intense competition and a lack of management oversight. Again, development schedules were prioritized over compliance, resulting in embarrassing public apologies by company leaders and an erosion of public trust.</p><p>Of course, Japanese companies are not the only cheats. In 2013, India's largest drugmaker, Ranbaxy, pleaded guilty in the U.S. to felonies related to faking manufacturing data, earning it a $500 million fine. In 2015, Volkswagen admitted it had equipped some 11 million diesel-powered vehicles with software to cheat emissions tests, triggering over $30 billion in fines and damages. In 2019, Boeing acknowledged knowing about a problem with its 737 Max jets a year before two crashes took the lives of 346 people; in 2021 it was penalized over $2.5 billion in the U.S.</p><p>With Japan's ineffective oversight bodies and unwillingness to impose big fines on bad actors, fraud scandals will inevitably recur.</p><p>The country needs a comprehensive program to root out fraud: protections for whistleblowers and quality-control workers, audits of the auditors and hefty penalties for those that break the rules. Third-party investigative bodies should be established in cases of fraud to determine causes, identify who was responsible and prevent more falsification. The status quo threatens Japan's hard-won global reputation for quality and craftsmanship in its products. Facing stiffer international competition, Japan should have solved its compliance problems long ago. It's time to end the shell game.</p>
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Why Japan keeps repeating the same corporate fraud scandals

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