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Japan's Obayashi says offices raided by prosecutors, shares tumble

[TOKYO] Obayashi Corp, one of Japan's 'big four' construction firms, on Monday said Tokyo prosecutors have raided its offices on suspicion of "deceptive obstruction of business", sending its shares tumbling as much as 8 per cent.

The statement followed local media reports over the weekend that Obayashi was under investigation due to suspected inappropriate behaviour during bidding for contracts related to a magnetic levitation (maglev) train line project.

Obayashi declined to comment on the allegation or elaborate on the investigation when contacted by Reuters.

The raid comes as Japan's corporate culture is under increased scrutiny after a string of compliance failings at manufacturers including automakers and steel makers.

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Prosecutors are investigating the bidding process for a contract to build a tunnel emergency exit which was won by a joint venture of Obayashi, Toda Corp and a unit of Central Japan Railway Co (JR Central), the Nikkei business daily reported.

Bidding for a separate contract won by Obayashi, Maeda Corp and the JR Central unit is also under investigation, the newspaper reported.

An executive vice-president at Obayashi was among those questioned by prosecutors, the Nikkei reported. An Obayashi spokesman declined to comment to Reuters on the matter.

Representatives of JR Central, Toda and Maeda told Reuters they had not been contacted by prosecutors.

Employees at another of the 'big four' constructors that is involved in the maglev project, Kajima Corp, underwent voluntary questioning by prosecutors, a company spokesman said.

A representative for the Tokyo District Public Prosecutor's Office could not be immediately reached for comment.

Japan is working on a 9 trillion yen (S$107.1 billion) maglev line linking Tokyo, Nagoya and Osaka. The line will cut the train travel time between Tokyo and Nagoya to 40 minutes from 100 minutes or more when operation begins in 2027.

Backed by cheap government loans and running in parallel to a bullet train network, the project has drawn criticism for its cost and lack of export potential. Obayashi's shares closed down 7 percent on Monday, giving it a market value of some 996 billion yen.

Shares of Kajima and Toda closed down around 4 per cent, Maeda was down around 2 per cent while JR Central was down around 1 per cent.

REUTERS

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