Scandals after scandals. Is Japan "un-investable"?

Yesterday, September 4, 2025, Nidec Corp (6594) shares cratered 22% to their daily limit, erasing about 800 billion yen (~$5.4 billion USD) from its 3.6 trillion yen market cap. This follows a probe revealing suspected improper accounting at its Chinese subsidiary.

Is this isolated, or the opening act in a larger Japanese market drama? For investors, it spotlights governance risks amid TSE's push for global appeal.

Here's a quick dive into Nidec's roots and red flags.

Nidec's Aggressive Rise

Nidec was found in 1973 as a small shop in Kyoto

Founded in 1973 by CEO Shigenobu Nagamori with just four employees in Kyoto, Nidec started as a mini AC motor maker and exploded via relentless M&A. It's pioneered hostile takeovers in Japan, sealing deals with napkin math over complex models, fueling its status as a large-cap aggressor. This bold strategy built a precision motor empire, but whispers of internal strain have long simmered.

The Dictator at the Helm

Nagamori's eccentric style—prioritizing ambition over talent—has driven success, but at a cost. A 2022 Diamond Magazine report, upheld in court despite Nagamori's defamation suit, painted him as a dictator:

Nagamori does not listen to what his subordinates say, and forces absolute obedience from executives, effectively dismissing, demoting, or cutting the salaries of those who do not obey him or who are unable to achieve the goals he has set for them. Executives who do not obey Nagamori and rebel against him are resigning one after another. The external human resources that have supported Nidec's automotive and home appliance businesses are running out, and there are no candidates to be found who can obey Nagamori absolutely and who can also manage the automotive and home appliance businesses.

Fear-Fueled Accounting Woes

Speculation links yesterday's revelation—improper accounting at Nidec Techno Motor in China, tied to a 200 million yen payment and asset write-downs—to this culture of fear. Subordinates may hide bad news to avoid wrath, echoing systemic issues. The third-party probe could expose more, eroding trust in Nidec's books.

TSE's Broader Challenges

This hits as the Tokyo Stock Exchange fights to lure global cash and become a financial hub, battling scandals and stagnation. About 4.5% of Tokyo and Osaka listings have organized-crime ties, per a report. Insider trades are rampant, implicating bankers, TSE employees, and even judges.

4.5% of Tokyo & Osaka listed companies were found to have organized-crime connections

A 2024 TSE survey showed 45% of TSE Growth Section-listed startups with market caps below their IPO levels. And now take Alt (260A), a self-proclaimed AI startup: It IPO'd in October 2024 but got delisted in 2025 after 90% of its 13 billion yen cumulative sales proved circular transactions. Of course the issuer is the most culpable actor here, but the blame game has already started casting doubt on the legitimacy of the underwriters and the TSE in the IPO approval process.

Nidec adds fuel to the fire.

Nidec founder CEO, Nagamori

End Note

Nidec's mess mirrors Toshiba's 2015 scandal, where post-2008 Lehman Shock pressures led to 152 billion yen in profit inflation via unreasonable targets and concealment. In the end, Toshiba succumbed to activists, then a PE buyout. If Nidec's top management involvement holds, it could spell similar turmoil for investors.