Prosecutors said in a statement that Ghosn and Representative Director Greg Kelly conspired to understate Ghosn's compensation over five years starting in fiscal 2010 as being about half of the actual 9.998 billion yen ($88.9 million).
Automaker Nissan on Monday accused its chairman, president and chief executive officer Carlos Ghosn of "significant acts of misconduct" including underreporting his salary and said it would move to fire him, as reports emerged that he had been arrested in Tokyo.
The Japanese broadcaster NHK said Mr Ghosn was arrested on Monday after he voluntarily submitted to questioning by Tokyo prosecutors.
The scandal abruptly threw into question Mr Ghosn's future as leader of the Renault-Nissan-Mitsubishi alliance, which sold 10.6 million cars previous year, more than any other manufacturer.
Nissan said it informed the authorities about suspicions of falsified financial reporting and misuse of company funds and assets by Mr Ghosn after a months' long investigation prompted by a whistleblower.
The men can be held without charge for 48 hours in Japan but that can be extended by up to 20 more days.
Nissan and Mitsubishi have already said they will propose removing him as chairman.
At a press conference on Monday, the Nissan CEO said he felt "despair, indignation, and resentment".
Nissan spent 2 billion yen on homes for Ghosn in Rio and Beirut via a Dutch subsidiary, with Kelly overseeing the transaction, the Nikkei newspaper reported, citing unnamed sources.
Nissan forecast a flat year in 2018 for the Middle East vehicle market, as still-slow economic growth and the introduction of Value-Added Tax has taken a toll on consumption, the company's regional director said in June.
Fight over Jim Acosta's White House press pass seems far from over
In the Friday ruling, the judge restored Acosta's credentials temporarily while a CNN lawsuit against the administration proceeds. Above is a copy of the letter that the White House sent Acosta on Friday.
Mrs. Obama says 'Access Hollywood' tape led her to speak out
Penguin Random House, Obama's publisher, revealed Friday that Becoming sold 725,000 copies - on the first day alone. Obviously, the Kimmel team couldn't go too insane for numerous reasons but the end result is still a giggle.
Court paper mistake reveals criminal charge against Julian Assange in US
Seitu Sulayman Kokayi was charged enticing a teenage girl to have sex with him. " Prosecutors have also considered tying Mr. Assange was granted asylum by Ecuador, and he's been living in the country's London embassy since 2012.
Ghosn was one of the first executives to champion electric cars, and he also developed a range of low-priced cars for emerging markets.
Its investors got their first chance to react to the news on Tuesday - with shares falling 6% at one stage, alongside those of Mitsubishi.
Ghosn's removal would deprive the manufacturer of a seasoned leader, and follow a number of surprise shakeups in the sector that have brought new CEOs to Volkswagen AG, VW's Audi brand, Daimler AG and Fiat Chrysler Automobiles.
Saikawa said Nissan's board will vote Thursday on dismissing both Ghosn and Kelly, who he described as the "mastermind" of the alleged abuses.
A French citizen, Ghosn also was credited with helping French carmaker Renault become profitable through cost-cutting measures and new products like electric cars.
Shares in French automaker Renault (RNSDF), of which Ghosn is CEO, plunged as much as 13% in Paris. Indeed, he's been CEO of Renault since 2005, and led that company along with Nissan, where he served as CEO from 2001 until April 2017. Mr Ghosn remained in that post until past year.
Arrest has "destabilized" the outlook for the Renault-Nissan-Mitsubishi Alliance.
The announcement sent shockwaves through the automotive industry where Mr Ghosn, 64, is seen as titan, responsible for a dramatic turnaround at Nissan in the early 2000s.
Renault shares plunged almost 5% on the shock news.
Saikawa said he could not provide more details because the investigation was continuing.