"A castle takes three years to build, yet it can fall in a single day." Japanese Prime Minister Shinzo Abe seems to favor this proverb so much that he used it in his 2016 New Year's reflection and again after the plunge in support for his cabinet in June, probably in an entirely different mood. Early last year, he was widely supported by the Japanese public, but now there are voices calling for him to step down.
The saying is also used to remind entrepreneurs and politicians to maintain caution and reverence. While it remains unknown whether Abe's "castle" built over the past five years will collapse before the lower house election on October 22, it's true that a time-honored Japanese brand is falling.
According to reports, Japan's third biggest steelmaker Kobe Steel acknowledged on October 8 that it falsified data related to strength and durability of some aluminum and copper parts products and sold them to some 200 companies. Naoto Umehara, an executive vice president at the company, admitted that falsifying data was an organized effort that could go back 10 years. There is no doubt that this case will cast a shadow on the reputation of Japanese companies.
Founded in 1905 and ranked among the world's top 500, Kobe Steel is Japan's top-notch supplier of aluminum and copper products and has branches in the US, Europe and China. Abe worked in the company three years before entering politics in 1982. Given the company's extensive pool of clients in and outside Japan, the falsification will not only undermine the company's reputation, but also harm other industries. The 200 or so companies that used the products of fabricated data include Toyota, Honda and Boeing.
Among the users of Kobe products were Hitachi that made trains for the UK and the H2A rocket launched by Mitsubishi Heavy Industries on Tuesday. Although no safety problem due to using Kobe products has been revealed, the scandal will likely taint the well-established brand of "Made in Japan."
There have been a number of similar scandals involving Japanese companies in recent years. Olympus Corp was revealed in 2011 to have falsified financial accounts for about 20 years. Toshiba was found in 2015 to have overstated its profits for years. Also Takata, the world's second-largest supplier of airbags, was exposed in the same year to have manipulated test results for airbag inflators. In 2016, Mitsubishi Motors and Suzuki Motor were involved in improper fuel-economy test scandals.
Such scandals occurred from time to time as the lackluster Japanese economy's Lost Two Decades constrained development of Japanese companies and eclipsed their competitiveness. Meanwhile it became harder for them to profit against their Chinese and South Korean manufacturing rivals. To compete with their counterparts in China, South Korea, the US and Europe, some Japanese companies began fabricating financial accounts and overstating profits.
This may have temporarily created some development space, but it has stained the craftsmanship spirit in which Japanese people take pride and does no good for the long-term development of a company. It is through the relentless pursuit of perfection that Japan recovered from the ruins after 1945 and Japanese companies earned their international reputation amid fierce competition.
In fact, one of the core values of Kobe Steel is to "provide technologies, products and services that win the trust and confidence of our customers we serve and the society in which we live." Regrettably, the company kept falsifying data for nearly 10 years, as did some other Japanese companies.
Japanese companies have won worldwide trust and recognition with their unremitting pursuit of perfection. They are now in decline for varied reasons but the abandonment of their core values must be a prime culprit.