Photo taken on June 29, 2020 shows the logo of Toyota Motor Corp. in Tokyo, Japan. [Photo/Xinhua]

Japan's transport ministry has uncovered that the country's five major automakers -- Toyota, Honda Motor, Mazda, Yamaha Motor and Suzuki Motor -- have been implicated in illegal fraudulent practices during their mass production certification applications.

Amid the brewing scandal, top executives of these companies made public apologies with follow-up measures, but the revelation, shocking both domestic and international communities, has raised concerns about its potential impact on Japan's automotive industry and the broader economy.

Frequent counterfeiting

In recent years, Japanese automakers have repeatedly been embroiled in certification cheating scandals. Late last year, Toyota group's wholly owned subsidiary Daihatsu Motor Co. was found to have committed 174 violations, leading to a suspension of all its ongoing domestic and international vehicle shipments.

Following the Daihatsu scandal, the Ministry of Land, Infrastructure, Transport and Tourism ordered 85 certified vehicle and motorcycle manufacturers to conduct internal investigations. As of May, Toyota and four other companies were found to have violated regulations in their applications for mass production certification.

At a press conference in Tokyo on Monday, Toyota Motor Corporation Chairman Akio Toyoda apologized and acknowledged that tight delivery schedules and repeated rework demands had placed excessive stress on employees during the final certification testing stages.

Toyoda also cited the lengthy and complex production processes, which no single person could fully oversee, as a contributing factor to the fraudulent behavior, after the company admitted to cheating on certification and safety tests for seven models of cars sold in the country.

The rise of electric and smart vehicle technologies has diminished the advantages that Japanese automakers once held in the fuel-efficient and durable vehicle segment, said Tang Jin, a senior researcher at Japan's Mizuho Bank, who noted that the anxiety over losing their competitive edge in the face of emerging technologies may have driven these companies to commit the fraud.

Expressing deep regret over the new revelations, Japan's transport ministry emphasized that certification fraud undermines consumer trust and will destabilize the vehicle certification system.

The ministry has decided to conduct on-site inspections at all five implicated companies.

Inspectors will question quality control officers and analyze documents to uncover the full extent of the malpractice, said the ministry, adding that severe penalties may be imposed depending on the findings.

Multiple models involved

So far, certification violations have been identified in 38 models across the five scandal-hit companies, 32 of which are no longer in production.

Honda has the highest number of affected models, with 22, all of which are out of production. Three of Toyota's seven affected models are still in production: Corolla Fielder, Corolla Axio, and Yaris Cross.

The transport ministry unveiled that Toyota submitted falsified data for pedestrian protection tests for its three in-production models and illegally modified test vehicles for crash tests on four discontinued models. As a result, shipments of six in-production models from Toyota, Mazda, and Yamaha have been halted until their compliance with safety standards is verified.

As the internal investigations are not yet complete, and the transport ministry's on-site inspections have only just begun, the possibility of further expansion of the falsifying issue still exists, according to industry insiders.

Local experts suggest that the recurring certification issues in Japan's automotive industry indicate systemic problems within the certification process itself, urging the transport ministry to proactively engage with companies to update outdated regulations and improve the system.

Uncertain impact

Local media reported that the transport ministry's inspections could last up to two months. Automotive industry analyst Takaki Nakanishi estimated that if Toyota and Mazda's affected models remain halted for two months, production could drop by 20,000 to 30,000 units.

Japanese Finance Minister Shunichi Suzuki recently noted that the shipment suspensions would inevitably lead to reduced production, significantly impacting Japan's economy. He emphasized the need to monitor the situation closely to assess the extent of the damage and the potential for further spread.

As of May, Japan's eight major automakers had supply chains involving 59,000 companies with total transactions amounting to 41.9 trillion yen (about 268 billion U.S. dollars), data from credit research company Teikoku Databank showed.

Yoshiki Shinke, economist at Dai-Ichi Life Research, cautioned that given the uncertainty about the extent of the production suspensions and their duration, it is rather difficult to predict the exact economic impact.

Earlier exposure of irregularities led to a decline in the shipments of the Japanese auto industry in the first quarter, further dragging down industrial and mining production during the period.

Preliminary data released by the Cabinet Office showed that Japan's real gross domestic product (GDP) shrank by an annualized 2 percent in the January-March period from the previous quarter.

The widespread suspension of various models would affect the entire supply chain, according to Tang, also a renowned expert in the automobile sector.

If Japan's manufacturing industry fails to make significant improvements, the nation's "craftsmanship spirit" may lose its luster, he said.

After Japanese companies in the home appliance, semiconductor and electronics sectors have been overtaken, a decline in the automotive industry could erode confidence in Japan's manufacturing sector as a whole, he added.

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