UNDER the once-vaunted “keiretsu” system of close, trust-based ties between manufacturers and suppliers, “Made-in-Japan” became a byword for industrial quality and reliability.

That reputation has eroded over recent years.

Kobe Steel is the latest in a string of corporate scandals involving data tampering and other methods of cheating to tarnish Japanese firms’ quality stamp.

It may be a sign that the government’s push to improve corporate governance is seeing greater disclosure of wrongdoing.

But the root cause is more likely that Japanese manufacturers are failing modern compliance standards as they grapple with a shrinking domestic market and increased global competition.

As the focus has shifted to market mechanisms instead of cosy relationship-based arrangements, Japanese manufacturers have had to compete on price and expand their client base.

“Growing global competition has forced Japanese manufacturers to cut costs to be more efficient, while fulfilling a production quota which is often difficult to achieve,” said Motokazu Endo, a lawyer at Tokyo Kasumigaseki law office.

The “keiretsu” system was the bedrock of Japan’s automotive industry. As the market has become more competition based, those automakers now invest less money in their suppliers and spend less time checking what those suppliers’ factories are producing, said Hitoshi Kaise, an auto industry consultant and partner at Roland Berger.

Beyond that, Japan’s economy has suffered decades of anaemic growth, bogged down in deflation with its population shrinking and with growing competition from its Asian neighbors.

Those pressures have potentially whittled away at Japanese firms’ ability to compete, said Hideaki Miyajima, a Waseda University professor and corporate governance expert.

The list of manufacturer miscreants is long and growing.

Nissan Motor Co. has had to recall every new car it sold in Japan in the last three years after it falsified safety checks.

Both Suzuki Motor Corp. and Mitsubishi Motors Corp. have faced scandals over fuel economy tests on their vehicles, and there was wrongdoing by the now bankrupt air bag maker Takata, Toyo Tire & Rubber Co. and Asahi Kasei Corp.

“While focusing on targets was right in the beginning, it has gone too far, with companies that can’t hit their targets resorting to deception,” said Hiroshi Osada, a production quality expert and Bunkyo University professor.

Over the last 15 years, compliance rules have become stricter but many Japanese companies have carried on with practices common in the past, said Nobuo Gohara, a lawyer specializing in compliance. (SD-Agencies)