‘Made in Japan’ Falls From Grace Amid Scandals, Systematic Flaws in Manufacturing Industry

Xinhua General News Service

October 12, 2017

A series of industry scandals, the most recent of which saw Japan’s third largest steelmaker Kobe Steel under fire for years-long misconduct of data fabrication, have revealed systematic flaws in Japan’s manufacturing industry, raising concerns over the quality of the “Made in Japan” brand, said local analysts.

Kobe Steel said on Sunday that some of its aluminum and copper products were subjected to falsified data, and the misconduct, which could be traced back as far as ten years ago, affected a wide range of Japanese manufacturers, with problematic products used in cars, aircraft, Shinkansen bullet trains, and even rockets and defense equipment.

The scandal followed a series of similar improprieties recently in Japan, with Japan’s Nissan Motor Co. saying last week that it will recall more than 1.2 million vehicles which underwent flawed safety inspections.

What might have been a heavier blow to the Japanese manufacturing industry is that Takata Corp., whose problematic airbags were blamed for more than a dozen deaths, pleaded guilty in the United States in February for misleading automakers about the safety of the airbags.

Local analysts pointed out that the successive scandals, while reflecting inherent problems of the companies in question, exposed a larger problem in the governance mode and corporate culture of Japanese enterprises.

Japan’s manufacturing industry has been trying to establish itself among fierce international competition by building the image of good quality for “Made in Japan” products, but the multiple scandals have dealt a heavy blow to such efforts, exposing to the public the underlying problems, said Zhu Yan, professor of economics at Takushoku University in Japan.

“The corporate governance mode in Japan is defective in supervision and lacks checks and balances,” said Jin Jianmin, a senior fellow at Fujitsu Research Institute in Tokyo.

“Without an efficient supervision mechanism and under huge pressure to make a profit among fierce competition, enterprises could easily turn to cheating and such misconduct is hard to uncover at an early stage,” said Jin.

Kobe Steel, for example, has booked red ink for the past two consecutive fiscal years, with a deficit of 23 billion yen (US$205 million) logged for the fiscal year 2016. The company, hence, has been under immense pressure to make a profit.

Meanwhile, cheating also seems to have become an easier choice especially as past wrongdoings went by unpunished.

A number of misconducts have been found associated with Kobe Steel in the past few years. Shinko Wire Co., a Kobe Steel affiliate, for example, admitted in 2016 that it had misreported data on the strength of stainless wires for springs.

The misconducts, however, passed unnoticed in society, and Kobe Steel’s senior management hardly paid price, which, to some extent, induced the recurrence of similar wrongdoings, said Jin.

Zhu said that Japanese Prime Minister Shinzo Abe has been promoting the virtues of corporate governance in Japan since he retook office in 2012, but the focus was merely on boosting profitability and investment, while improving the governance structure of corporations was ignored.

To some extent, this negligence of improving corporate governance structure has contributed to the increasing number of problems exposed on the part of Japanese enterprises, said Zhu and some other analysts.

The analysts further made a reference to the Abe administration’s suspected coverup of favoritism scandals implicating the prime minister and two educational institutions.

“The government is hiding things that are unfavorable to it. And many enterprises are doing the same thing. It’s a thing that is commonplace in Japan nowadays,” said Zhu.

Analysts pointed out that such “cheating culture,” if it were to spread further, would severely damage the competitiveness of Japan’s overall manufacturing industry, as well as Japan’s reputation as a country.

“It’s so regrettable that such things happened to companies that represent the image of Japan,” said Sadayuki Sakakibara, chairman of the Japan Business Federation (Keidanren), adding that the manufacturers in question should find out the root cause of such scandals and make sure they never happen again.

“The situation for Japan’s manufacturing industry is very severe,” he said.

Copyright 2017 Xinhua News Agency.

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