Japan’s largest carmaker Toyota has been in the spotlight recently, but for all the wrong reasons.

Goods and services from the land of the rising sun are known for their high standards and quality, as well as reliability. However, Japanese automakers have recently been under fire for falsifying test certification applications.

In 2023, two of the top three largest global auto brands were from Japan, according to Statista. Toyota took the crown with 10.7% market share, while Germany’s Volkswagen came in second with a 6% market share. Japan’s Honda Motor was the third largest brand, commanding 4.6%.

But for Toyota, the top automaker by market share in the world, the latest safety scandal is not the first time it’s being investigated for false test data.

“Kaizen” is a Japanese philosophy — broadly translated as “continuous improvement”— that’s been adopted by Toyota and touted as one of the company’s core values.

However, its reputation has taken a hit, after a wide ranging investigation into Japanese auto firms by the country’s Ministry of Land, Infrastructure, Transport and Tourism revealed that five major Japanese carmakers — including Toyota — had used false data to apply for certification for their cars.

Irregularities in certification applications were discovered from Toyota, Mazda, Honda, Suzuki Motor and Yamaha Motor, the transport ministry said on June 3.

All five companies had submitted false test data, or in the case of Toyota and Mazda, falsified the vehicles used in crash tests.

Stocks of all five Japanese automakers plunged in the week following the revelations, with Toyota most notably losing 2.45 trillion yen ($15.62 billion) in market value last week alone.

In response to the scandals, Toyota chairman Akio Toyoda apologized to stakeholders and customers, and the company halted shipments and sales of three models currently manufactured in Japan, namely the Corolla Fielder, Corolla Axio and Yaris Cross.

Toyoda said that seven of the company’s models were “tested using methods that differ from the standards defined by the national authorities.”

While the latest revelations were only made public two weeks ago, the transport ministry’s investigation were initially triggered by another safety scandal at a Toyota subsidiary, Daihatsu.

In December, Daihatsu halted shipments of all its vehicles after an investigation found safety issues with its cars, including cases where airbag control units used in tests for some models were different from the ones sold to the public.

In April last year, Daihatsu said it had rigged side-collision safety tests carried out for 88,000 small cars, most of those sold as Toyotas. The investigation by an independent third party panel also revealed that the certification irregularities extended all the way back to 1989.

Daihatsu apologized for “betraying the trust of our customers and other stakeholders and for causing great inconvenience and concern.”

Some of Daihatsu’s cars have resumed shipment in April this year after revised testing.

In 2022, Hino — Toyota’s truck-making subsidiary — falsified emissions data on some engines as far back as 2003, which affected over 640,000 vehicles.

Given the recent scandals, will investors flee the stock, preferring to sink money in other scandal-free Japanese automakers instead?

As of June 13, shares of Toyota were at their lowest level since Feb. 6. Since the scandal broke on June 3, Toyota’s shares have plunged 8%.

However, a note by Citi on June 3 said the impact on share prices on the sector will be “minimal.” They add that “there are no issues anywhere on the performance front and the improprieties do not look as if they will lead to recalls.”

Citi pointed out that part of the problems lie with the certification process itself, saying that “in many cases even if the certification process was not followed exactly, tests that were effectively even more rigorous were subsequently conducted.”

Citi analysts predicted a monthly output drop of approximately 11,000 units for Toyota, translating to a hit of about 22 billion yen ($139.89 billion) in sales. “However, as production is likely to resume in two to three months, we think the overall impact is likely to be modest,” they added.

Market analysts as a whole have echoed positive sentiment.

According to FactSet data, 12 out of 19 analysts in June have given a “buy” or “overweight” rating to the stock, with a mean target price of 3,888.56 yen, which represents a 24.3% upside to its closing price on June 13. The remaining seven gave “hold” calls.