The company said the fabrications, which might have started a decade ago, could affect products sent to as many as 200 companies. "Kobe Steel's technology is not something easily substitutable by others, and existing customers have nowhere else to go", said Yasuo Sakuma, Chief Investment Officer at Libra Investments in Tokyo.
Toyota, Mazda and General Motors are among the firms affected.
It was unclear if the total of 40,900 tons of products involved included shipments to other countries.
And US plane manufacturer Boeing also said it had not found any safety issues.
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The financial penalty will be the heaviest ever handed out to a single company by the Taiwanese antitrust regulator since its establishment in 1991.
"Boeing has been working closely and continuously with our suppliers since being notified of the issue to ensure timely and appropriate action, including comprehensive inspections and analysis throughout our supply chain", the company said in an email. Faced with the latest in a series of missteps that have undermined Japan's reputation for high-quality production, the industry ministry instructed Kobe Steel to assess the safety impact from the scandal.
The problem was discovered during internal inspections and "emergency quality audits", it said.
It has set up a committee headed by its president to investigate quality issues and hired an outside law firm to conduct a probe into the misconduct. At this point, we don't see a critical problem as we have our own safety inspection on materials we use.
The Japanese government wants the steelmaker to report on the result of its safety checks within two weeks.
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In addition to Jefferies & Co reporting its stock price target, a total of 20 brokers have issued a research note on the company. As of the end of the quarter Janus Capital Management LLC had sold 7,874,981 shares trimming its stake by 66.6%.
Akihiro Tada, director of the ministry's Manufacturing Industries Bureau, urged the company to move quickly in resolving the problems, which are thought to have affected numerous country's largest manufacturers.
Kobe Steel Ltd parts used in Japan's iconic bullet trains failed industry standards, officials said Thursday, bringing to light fresh evidence of wrongdoing by the steelmaker as investors speculated that the crisis could trigger a breakup of the 100-year-old company. "But they did not meet the specifications that were agreed between us and Kobe Steel", a Hitachi spokesman told AFP.
Kobe Steel shares closed at the limit low after being untraded for the whole session, diving 22 percent to 1068 yen.
Another case involved 6,611 items of materials shipped to 70 customers beginning in November 2011.
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The two B-1B bombers were accompanied by two F-15K fighters from the South Korean military after leaving their base in Guam, according to South Korea's military.
In June of last year, it said an affiliate, Shinko Wire Stainless Co, falsified data on tests for tensile strength of some stainless steel wire for springs over a period of more than nine years.