Business News

Japanese prosecutors raid more firms over maglev train contracts

Key Points
  • Shimizu, Kajima raided on Monday morning
  • Constructions firms' share prices down more than 3 pct
  • $80 bln maglev line to link Tokyo, Nagoya, Osaka
Kajima Corp.'s head office is seen against blue skies in Tokyo on Monday Jan. 22, 2007. Shares of Kajima Corp. and Obayashi Corp. led declines among Japan's largest builders after their offices were raided in a crackdown of possible illegal bidding in Japan's 53.5 trillion yen ($440 billion) construction market.
Robert Gilhooly | Bloomberg | Getty Images

Japanese prosecutors on Monday raided the offices of two of the country's biggest construction firms as they expanded an investigation into suspected collusion over contracts for an $80 billion high-speed magnetic levitation (maglev) train line.

Investigators entered the offices of Shimizu Corp and Kajima Corp in Tokyo on Monday, spokesmen for the two companies said, in the latest scandal to hit corporate Japan following revelations of data fraud at major manufacturers.

The raids by prosecutors and anti-trust agency officials come a week after officials launched an investigation into Obayashi Corp, another construction company, for suspected bid-rigging in maglev-related contracts.

While the scope of the probe broadened on Monday the scale of the suspected wrongdoing remained unknown and prosecutors declined to comment.

Kajima shares plunged as much as 4.6 percent and Shimizu shares fell as much as 3.7 percent on news of the raids, while the Nikkei 225 index was 1.5 percent higher.

Shares of Taisei Corp, another member of the so-called "big four" group of Japanese construction firms involved in the maglev project, were also down 2 percent although a spokesman said it had not been raided.

Japans large and politically influential construction industry has been a frequent source of scandals such as bid-rigging.

Legislation has been tightened in recent years to prevent collusion over contract bids, and Obayashi in 2006 required managers to sign a pledge to abide by antitrust laws. The next year, however, the firms top management resigned following a public works scandal.

Backed by cheap government loans and running in addition to Japan's extensive bullet train network, the maglev project linking Tokyo, Nagoya and Osaka has drawn criticism for its cost and lack of export potential.

Proponents led by Prime Minister Shinzo Abe say the project will spark badly needed economic growth.

The big four contractors have won roughly an equal number of orders for about 70 percent of the projects, according to Japanese media reports.