By Dow Jones Business News, August 27, 2014, 12:55:00 AM EDT

TOKYO--A scandal that started with a few suspicious images has led Japan's most prestigious research institute to slash its stem-cell unit by half and acknowledge deeper flaws in its ethics.

The move by the Riken institute came seven months after the publication of papers that it initially hailed as equal in importance to the Copernican revolution in astronomy. Since then, the papers have been retracted, and one of the co- authors committed suicide.

On Wednesday, Riken said it would scale down to half its size the Center for Developmental Biology, rename the center and choose a new director with input from non-Japanese scientists, an indication of how the scandal has damaged the reputation of Japanese science.

"We believe it is important to move forward with the restructuring to improve the quality and promote honest research," said Ryoji Noyori, the Nobel Prize winner who leads Riken.

Riken's overhaul could also sway the field of stem-cell science, which has received billions of dollars in research funds in the hopes of cures for ailments such as diabetes and heart disease.

Some details of the overhaul, including whether anyone beside the director would indeed lose their job, remained murky. Nevertheless, science writer Shinya Midori said, "This could trigger scaling down in the field of regenerative medicine."

The scandal at Riken has deeply shaken the country's science establishment and the wider stem-cell world and sparked a debate about research ethics in Japan amid "results-first" pressure.

The drama has focused on the institute's 14-year-old developmental-biology center and erupted after one of its scientists, Haruko Obokata, was found guilty of manipulating data in a pair of papers published in the journal Nature. The studies, which claimed to show a groundbreaking method of making stem cells by dipping cells in a mild acid solution, were quickly challenged and Nature retracted the papers in July, saying they contained inaccurate data.

Riken initially stood by the 31-year-old Dr. Obokata, who had been hailed as a national hero after her research was first published, but later distanced itself from what it called her "sloppy data management" and poor research ethics.

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Japan's Riken Reboots After Stem-Cell Scandal