Summary of the Core Content
In September 2026, Nidec, a leading Japanese manufacturer of precision motors, was embroiled in a monumental scandal. Just six months prior, the company had been exposed for systematic financial fraud amounting to 11 billion yuan. Further investigation revealed 844 instances of product fraud that spanned 12 departments and dated back to 2012. These frauds included unauthorized alterations to production processes and materials, manipulation of test data, and falsification of product origins to evade tariffs. Sixty of these issues posed potential safety hazards, leading to the possibility of product recalls. This incident is not an isolated case but the latest manifestation of a widespread trend of fraud in Japanese manufacturing over the past half-century. Companies such as Kobe Steel, Mitsubishi Electric, and the five major automobile manufacturers have been involved in such practices for decades. Behind this lies a complex mix of cultural degradation, managerial collapse, extremely low costs of violations, and the cumulative pressures of a long-term economic downturn. This situation serves as a stark warning to China's rapidly expanding manufacturing industry.
Detailed Explanation
1. Two Major Scandals in Half a Year: Even the “Benchmark of Japanese Manufacturing” Couldn’t Hide It
Nidec’s story illustrates how a CEO set an unattainable KPI, forcing the entire company to engage in unethical practices. The founder, Yasuhiro Nagashima, transformed a small workshop into a global motor giant worth billions of yuan and was considered one of Japan’s “three golden brothers” along with SoftBank’s Masayoshi Son and Uniqlo’s Tadashi Yanai. He established a strict rule: if the company’s operating profit margin fell below 10%, it was considered a loss, and the CEO would be replaced, with even his own son not allowed to take over. Initially, employees only manipulated financial records—pretending that cheap materials were valuable and labor costs were actual equipment purchases to meet the 10% profit margin requirement. As the discrepancies grew too large to cover up, they started falsifying products: omitting required production steps, altering data on defective products, and even tampering with parameters in critical components for new energy vehicles and industrial equipment. The team investigating the financial fraud eventually uncovered all the issues, and the Tokyo Stock Exchange has threatened to delist the company if a remediation plan is not submitted by the end of October.
2. A Problem That Affects the Entire Japanese Manufacturing Industry
Nidec is far from an isolated case. A review of Japanese manufacturing scandals reveals that fraud was not the act of a few mischievous employees but a systemic issue that persisted for decades:
- Kobe Steel manipulated steel strength data for over 40 years, supplying products to companies like Toyota, Boeing, and Airbus, affecting industries ranging from aviation to nuclear power and defense.
- Mitsubishi Electric falsified data on subway air conditioning systems for 36 years, with over 10,000 defective units ending up in subways in New York and London.
- Kawasaki Heavy Industries altered engine data for the Japanese Self-Defense Forces, with nearly all of Japan’s main submarines equipped with faulty engines.
- In 2024, five major automobile manufacturers, including Toyota and Honda, were involved in data falsification, affecting over 5 million vehicles.
A third-party survey in Japan found that one in four companies had engaged in cheating or violations in the past five years, with one-third of these cases involving product quality fraud. Ironically, this period coincided with the global glorification of “Japanese craftsmanship” and quality management practices, during which these companies were secretly altering data.
3. Why Didn’t Anyone Speak Out for Decades? The Culture of Shame Undermined Accountability
Traditional Japanese culture emphasizes shame as a driving force for self-discipline, but in manufacturing, this concept was distorted. Exposure of problems was seen as even more shameful than the violations themselves. For example, at Kobayashi Chemical, 80% of 500 drug products were falsified over 40 years, with hundreds of employees involved, yet no one reported it. Reporting would have brought shame to the company and the entire team, branding the informant as a traitor. At Mitsubishi Electric, management repeatedly failed to detect the data alterations despite obvious signs. During Japan’s manufacturing heyday, the “on-site management” philosophy was replaced by cost-cutting measures, with temporary workers replacing long-serving employees. Management focused on profit margins and ignored factory operations, leading to a culture where no one dared to speak out.
4. Fraud as a “Rational Choice”
From a financial perspective, fraud was a profitable strategy for Japanese companies. Penalties were lenient: in the United States, fraud could result in billions in fines and jail sentences for executives, with product bans. In Japan, Kobe Steel’s fraud went unpunished, with only the CEO resigning and the stock price dropping slightly. The likelihood of being caught was also low, as most fraud cases were uncovered through internal audits. The benefits were substantial: altering data saved millions in rework and delays. With high costs and limited bargaining power with suppliers, companies saw fraud as a viable option.
5. A Warning for China’s Manufacturing Industry
China’s rapid expansion should not lead to complacency. Many Chinese companies are focusing on scale and market share, often cutting corners and manipulating data. The strict penalties for financial fraud in the A-share market are a good start, but more needs to be done. Quality control, regulatory measures, and employee incentives must be strengthened to ensure that China’s manufacturing reputation, built over decades, is not destroyed by similar scandals.