Japan trade ministry says Kobe Steel scandal harms trust in country's manufacturing

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On Wednesday, Kobe Steel added two more products to the list of affected materials: powdered steel, which is used to create molded steel products like gears, and "target material", a specialty mix of several kinds of metal used in the production of DVDs, television screens and other electronics equipment.

Car, train and aircraft makers are investigating whether they have used any sub-standard materials made by Kobe Steel. The company has found possible further cases of tampering, the CEO said, including in overseas operations. Shares in Kobe Steel stabilized on Thursday after investors, anxious about the financial impact and potential legal fallout, wiped about $1.6 billion off its market value in two days.

Shares in Kobe Steel fell by almost 40% in two days, wiping more than $1.5bn (£1.1bn) off its market value after the firm admitted fabricating data about the strength and durability of products it delivered to more than 200 companies.

Kobe Steel said the misconduct involved dozens of staff and possibly stretched back 10 years. It also found one case of falsified data on iron powder products - material used for auto parts such as gears - that were shipped to a customer.

Central Japan Railway Co, which operates the high-speed trains between Tokyo and Osaka, said two types of aluminum parts used to connect cars to wheels fell short in quality tests, though they don't pose any safety concerns.

There have been previous cases in Japan involving falsified data, including at Nissan Motor 7201.T , Mitsubishi Motors 7211.T and Takata, which filed for bankruptcy this year over faulty airbags that were blamed for 17 deaths and scores of injuries.

Toshiba is still working to recover from an accounting scandal that began in 2015.

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The data tampering at its aluminum unit could also hit plans to expand the business as carmakers increasingly turn to the material, which is lighter than steel, to meet tighter environmental rules.

Kobe Steel has not released the names of the manufacturers that received the affected goods, nor whether any of its own products might have incorporated them.

The Japanese government has asked the company to provide more information about the products supplied to more than 200 customers, reportedly including some of the country's biggest manufacturers, including defence contractor Mitsubishi Heavy Industries and a number of automakers.

It's not the first time Kobe Steel has been caught up in falsifying data. He criticized the apparently widespread falsification of data as "inappropriate".

Kobe Steel was founded in 1905 and has been a pillar of Japan's manufacturing sector.

In a statement on Wednesday, Kobe Steel denied a Nikkei business daily report that it meant to put its real estate business up for sale to help shore up its finances.

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