Seven people including three former Olympus executives have been arrested over their suspected role in a £1.1bn accounting fraud at the company.
Tsuyoshi Kikukawa, who stepped down from his role as chairman in October, was taken into police custody along with the company's former executive vice president, Hisashi Mori, and former auditor, Hideo Yamada.
Tokyo authorities have also arrested ex-Nomura bankers Akio Nakagawa and Nobumasa Yokoo and two other individuals suspected of taking part in one of Japan's biggest corporate scandals.
The seven men are alleged to have covered up huge investment losses through complex mergers and acquisitions deals.
An investigative panel commissioned by Olympus had already accused Mr Kikukawa, Mr Mori and Mr Yamada of playing leading roles in a 13-year scheme to hide losses from dodgy investments made in the late-1980's bubble economy.
The former Olympus executives are among 19 managers the company is suing over the scandal - Mr Kikukawa's home was one of the 20 sites raided by prosecutors in December.
The latest developments come just a month after an unofficial panel of experts cleared global accounting groups KPMG and Ernst and Young of any responsibility for the accounting fraud.
The scandal was revealed in October by Michael Woodford, 51, who was fired just two weeks after taking on the chief executive role.
Mr Woodford welcomed the arrests but raised questions over due diligence practices at the company's banks and accountants.
Speaking on Jeff Randall Live, Mr Woodford said: "I think this is real progress, many people in Japan told me this would never happen, this day would never come.
"Nevertheless, there are so many unanswered questions still, in relation to the olympus scandal."
He added: "This is encouraging because arrested today, not just the former executives of Olympus, but other parties, previous bankers and others who facilitated.
"So it is encouraging that the net has been drawn wider, but it still needs to go much further."
Mr Woodford said Olympus has a very strong medical business, so will survive in some form, but added: "It's balance sheet needs repair and it's capital structure urgently needs reinforcing."
At a press conference in London, Mr Woodford also called for the entire Olympus board to be replaced.
The Briton dropped his bid to return to the helm of the camera and medical equipment manufacturer last month , and has said he plans to sue the company for unfair dismissal.
Speaking about the personal impact of the scandal, Mr Woodford told Sky News: "Olympus initially rigourously denied it, tried to assassinate my character, it was just the most horrible and frightening nightmare.
"My wife was on the verge of a nervous breakdown, my children were petrified, it was just a terrifying ordeal."
Olympus, which is also under investigation by British and US authorities, is hoping its shareholder meeting on April 20 will mark a turning point in its downturn.
At least six of its 11-member board, including current president Shuichi Takayama, are reportedly set to resign.
The company's shares have lost half their value since the scandal broke.
On Monday it forecast a full-year loss of £262m, which was largely attributable to its beleaguered camera business - but its core endoscope operation appears unaffected by the scandal.
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