Japan Hit by Historically Large Corporation Scandal
Kobe Steel, a Japanese industrial giant, admitted to falsifying data on products sold to top customers such as Boeing, General Motors, and Toyota. Up to 500 companies might be affected by the scandal including the manufacturers of Japan's famous bullet trains.
Kobe employees faked reports that their aluminum, copper, and steel products met the requested strength and durability specifications, raising doubts on tons of material shipped over the past ten years. The deception has cast a shadow on Japan’s longstanding reputation for precision manufacturing which confers the nation a comparative advantage in the global market.
Some believe that the pervasive shame culture in Japanese corporations is to blame. “In Japan all companies share the same very stale air, where they hide mistakes,” says Koji Morioka, an economist at Kansai University. “Whistleblowing does not really work — somehow it is squashed.”
The Australia, meanwhile, argues that the core problem is living up to the legacy of the 1980s 'bubble economy' when Japan was poised to overtake the United States economically. It was the crucible in which companies like Kobe Steel formed their self image: the ideal company should strive towards high quality and global reach.
The market today has changed. Competitors from other regions are able to provide goods with best cost performance, and the importance of the quality has decreased in the competition of global market share.
The Kobe Steel Scandal is indicative of the Japan manufacturing industry’s struggle under increasing globalization. The nation must now find a way to maintain its precision manufacturing reputation and vye for cost leadership in a competitive environment all the while paying close attention to maximizing capital return.