Japan reels after car safety testing scandal

A car safety testing scandal in Japan has raised concerns about legal compliance and corporate governance after five automakers admitted to improperly obtaining the certification needed for mass production.

It was revealed on June 3 that auto companies, including Toyota and Mazda, had carried out safety tests in ways not approved by the Japanese government, meaning they had incorrectly been given model certifications before being sold.

Japan's Ministry of Land, Infrastructure, Transport and Tourism requested 85 vehicle and equipment makers to carry out internal investigations in January and February, following certification fraud issues at Toyota's Daihatsu Motor.

Some 68 companies have submitted their investigations and fraudulent activities were found at Toyota, Mazda, Honda, Suzuki and Yamaha Motor, affecting 38 models, including discontinued ones, totaling more than 5 million vehicles.

The transport ministry has begun on-site inspections of the headquarters of the five companies, and will assess the circumstances and severity of their misconduct to determine whether administrative sanctions are necessary.

A reduction in vehicle production stemming from safety test fraud discovered at Daihatsu Motor last year weighed heavily on the Japanese economy, which shrank at an annualized rate of 1.8 percent in the first quarter of this year from the previous three months.

The recent discovery of falsified certification tests may cast a shadow on Japan's economic recovery in the second quarter, experts said.

The issue may slow the pace of economic normalization through May and June, Chief Economist at Mizuho Research & Technologies Saisuke Sakai told Nikkei.

On June 6, Toyota and Mazda halted production of five models found to have been improperly tested.

Prolonged influence

Experts said the influence could be prolonged because the two carmakers have more than 3,000 second-tier and subsequent suppliers between them.

Kota Yuzawa, a research analyst at Goldman Sachs, told Nikkei that governance needs to be further strengthened regarding legal compliance.

Consumers expressed divided views on how differences between corporate standards and national standards should be handled.

"It's fine for each company to set their own standards but they should also evaluate their products in accordance with national standards," said Mitsuo Mita, a 22-year-old political science major in Tokyo.

He said the data from both evaluations should be disclosed to the public.

Changing the national standards all at once would affect all machinery and the economy, he said.

Big companies at fault should take responsibility and align their standards with the national ones, Mita said.

Kazuhi Ukita, a resident of Saitama Prefecture, said, "The real question is whether it is more reassuring to follow national standards or independent standards set by companies, as people want to choose the safest option."

Junko Watanabe, a 51-year-old Tokyo resident, said some auto manufacturers have been following even stricter standards than the national ones, but they have been punished anyway.

Penalties were imposed on those companies simply because they did not adhere to the national standards during the tests required to obtain model certification, Watanabe said.

"Japan is a conservative country that strictly follows many rules. If something is mandated by the government, it is considered the top priority," she said. "I think the national standards should be reconsidered."