Fraud scandal hits Japanese company linked to $10 billion Australian warship project

Tokyo is investigating serious fraud allegations involving a Japanese defence contractor linked to the country’s advanced Mogami warships scheduled to soon be built in WA.

Kawasaki Heavy Industries is accused of falsifying fuel efficiency data for diesel engines used in Japanese Maritime Self-Defence Force submarines and could be suspended from bidding for other military projects.

The Australian Government in 2025 selected Mogami as the winning design for a fleet of future general-purpose frigates, which are powered by Rolls-Royce gas turbine engines made under license by Kawasaki.

Under the $10 billion SEA3000 program, Mitsubishi Heavy Industries would build the first three warships for the Royal Australian Navy in Japan, before construction moves to Henderson.

Japan’s Defence Minister confirmed his department was conducting its own detailed investigation of the Kawaskai allegations including on-site inspections that were “in parallel with the company’s special investigation committee”.

“As the investigations are ongoing, I cannot provide further details. Once the facts are confirmed, we will respond appropriately,” Defence Minister Shinjirō Koizumi said on Friday.

According to Japanese media reports, Kawasaki Heavy reported falsified figures to make its engines appear to meet the ministry’s standards and to minimise variations in measurement values — and had allegedly done so since at least 2002.

The company has also been twice hit with a “strict warning” from the Defence Ministry since December 2024 over a slush fund scandal where the company generated 1.7 billion yen ($16.2 million) through inappropriate gifts to crew members and others.

Following a meeting with his New Zealand counterpart in Tokyo, the Japanese Defence Minister also addressed, for the first time, local concerns about a decision to allow a South Korean company to increase its stake in WA-based shipbuilder Austal.

Treasurer Jim Chalmers earlier this month confirmed Seoul-based defence giant Hanwha had been given permission to double its ownership of Austal, which is eventually expected to build the Mogami frigates at Henderson.

“I am aware that the Australian Treasury announced on the 12th (December) that it would not object — under strict conditions — to Hanwha’s proposal to raise its stake in Austal from 9.9 per cent to 19.9 per cent,” Mr Koizumi said.

He told reporters: “Japan and Australia have long communicated closely regarding the protection of Japan’s technical information and intellectual property.

“We will ensure that appropriate measures are taken in the joint development and production of Australia’s next‑generation general‑purpose frigates,” he added in a veiled reference to security concerns about Japan’s intellectual property.

The Sunday Times last month revealed Tokyo had repeatedly expressed concerns about the South Korean group buying more of Austal and had written at least twice to the Defence Department in Canberra ahead of the decision.

Austal was not consulted during the lengthy Foreign Investment Review Board process and has consistently pushed back against Hanwha, which unsuccessfully attempted to interest the company in a $1 billion takeover bid last year.

On, Friday both Japan and New Zealand declined to detail what discussions they had about possible exports of Mogami warships to the Pacific nation, with Mr Koizumi saying both countries would “continue close communication” on the proposal.