* Kobe previously said data tampering may go back 10 years
* Kobe still trying to nail down extent of tampering -source
* Cheating went on for decades -Nikkei report (Adds details on cheating, contex and analyst comment)
TOKYO, Oct 17 (Reuters) - When cheating becomes habitual, the consequences could be costly.
At embattled Kobe Steel Ltd falsification of data on products went on for more than a decade, a source with knowledge told Reuters, deepening a scandal that has sliced off about $1.6 billion off its market value in just over a week.
And that could be just the tip of the iceberg, legal experts have said, given the potential legal fallout as compensation for even a small number of the 500-odd companies engulfed in the scandal could prove costly.
Japan's No.3 steelmaker is still trying to nail down the extent of the tampering, said the source, requesting anonymity because he was not authorized to speak to the media.
According to an unsourced Nikkei report, the cheating at the firm went on for decades with the knowledge of plant and quality control managers, well over the 10 years that Kobe Steel had acknowledged last week
"We cannot confirm the Nikkei report as our investigation is ongoing," a Kobe Steel spokesman said.
The revelations made on Oct. 8 have sent shockwaves through supply chains around the world ensnaring companies from operators of Japan's iconic bullet trains to the world's biggest aircraft maker, Boeing Co,.
While the company has not fully identified the extent of the cheating, it told analysts and investors on Monday it had nearly 368 billion yen ($3.3 billion) on hand in cash, short-term securities and unused credit from banks.
It is also seeking to generate cash by cutting working capital or selling assets.
"They have ... received numerous feedback from their customers, such as from beverage can producers, or railway companies that no immediate recall is required or the products involved are not a safety concern," Thanh Ha Pham, an analyst at Jefferies who attended the briefing, wrote in a note.
"Obviously, Kobe cannot rule out the risk of future impact, but so far so good, in our view," he said.
The company will have no problem paying off a 20 billion yen bond due on Oct. 27, the source told Reuters.
The firm has forecast a profit for the year through March 2018 after two successive annual losses, but the outlook has been clouded by the potential fallout from the scandal.
The steelmaker faces a range of legal risks, including compensation sought by clients or their customers, penalties for violating unfair competition laws for false representation among others.
Kobe Steel shares were up about 6 percent by 0406 GMT, while the broader market was slightly higher.
The scandal follows other cases of similar malpractice and financial accounting problems at companies including Mitsubishi Motors, Takata Corp and Toshiba Corp, which have dented confidence in Japan's manufacturing prowess and corporate governance.
No safety problems have surfaced as Kobe Steel attempts to confirm the extent of the data tampering.
Kobe Steel Chief Executive Hiroya Kawasaki on Friday said about 500 companies had received its falsely certified products, more than double its earlier count.
Most of the problems have occurred in the company's aluminium and copper business, where many of the products are made to specifications required by automakers and other companies. But cases of falsified data have been found in its steel and other businesses.
Such is the extent of Kobe Steel's role in global supply chains, the company produces engine valve springs found in half the world's cars, according to its website.
It also counts amongst its former employees Japan's Prime Minister Shinzo Abe, who worked at Kobe Steel from 1979 before entering politics in the early 80s and who has pushed Japanese companies to embrace international corporate governance standards.
($1 = 112.0700 yen) (Reporting by Yoshiyasu Shida; Additional reporting by Yuka Obayashi; Writing by Aaron Sheldrick; Editing by Himani Sarkar & Shri Navaratnam)