Although the N1K1-J was an outstanding fighter, it did have some serious defects. Its Homare 21 engine was notoriously unreliable, and the complex doubly-retracting landing gear was subject to frequent failures. Even before the N1J1-J entered production, work had already begun at Kawanishi on correcting some of its more glaring defects, in particular its long and complex landing gear.

The result of these changes was the Shiden-Kai (Violet Lightning--Modified). Given the designation N1K2-J, the aircraft was completely redesigned so as to use fewer components in order to simplify its construction. More non-critical materials were to be used. Another step towards simplification involved the use of pre-formed sheet construction. Perhaps the most easily-noted innovation was the use of a low-mounted wing in place of the original mid-mounted wing. This permitted a shorter set of landing gear legs to be used, and the complex double-retraction system which had caused so many problems could be eliminated. Another unique design feature was the wing flaps which operated automatically to increase "lift" when necessary during extreme maneuvers. The device, operated with electricity and oil pressure using a U-shaped tube containing mercury, was an important factor in the aircraft's maneuverability in combat. In addition, the fuselage was lengthened and the tail surfaces were redesigned. The result was a virtually new aircraft, although the unreliable 1990 hp Homare 21 engine of the N1K1-J was retained. Armament was four 20-mm cannon, all mounted internally to the wing.

The first N1K2-J prototype took off on its maiden flight on December 31, 1943. It was handed over to the Japanese Navy for trials in April of 1944. Although the Homare 21 engine was still mechanically unreliable, the Navy liked the aircraft so much that they authorized quantity production of the N1K2-J to be its standard land-based fighter and fighter-bomber even before the service trials were completed. Production aircraft were designated Navy Interceptor Fighter Shiden Kai (Violet Lightning Modified) Model 21. In addition to the Kawanishi plant at Naruo, the Shiden Kai was ordered into production at the Himeji works of Kawanishi. Shiden Kai fighter aircraft were also ordered into production from the Dai-Nana Kokuki Seisakusho (7th Airframe Works) of the Mitsubishi Jukogyo K. K. at Tsurashima, from the Aichi Kokuki K. K. at Eitoku, from the Showa Hikoki K. K. at Shinonoi, and from the Naval Air Arsenals at Hiro, Omura, and Koza.

A further seven prototypes had been completed by June of 1944, However, the prototypes began to experience a long series of teething troubles, which proved difficult to correct. The Shiden-Kai program began to slip its schedules, and by the autumn of 1944 the N1K2-J production lines were beginning to experience shortages of vital components due to B-29 attacks against the factories of Kawanishi's subcontractors. By the end of 1944, only 60 Shiden Kais had been delivered by the Naruo factory, and production at Himeji did not begin until March of 1945. The other manufacturers in the Shiden Kai pool were never able to produce more than a handful of aircraft.

The Shiden Kai was to become perhaps the best all-round fighter to be operational in the Pacific theater. It was fast, powerful, and maneuverable, and was well-armed and armored. In the hands of an experienced pilot, the Shiden-Kai was the equal of any Allied fighter, even the later models of the P-51 Mustang which began to appear over Japan in the spring of 1945. In one notable action, on February 16 1945 over Yokohama, Warrant Officer Kinsuke Muto of the 343rd Kokutai in an N1K2-J single-handedly battled a dozen F6F Hellcats. He shot down four of them before the rest were forced to break off combat and return to their carrier. However, against the B-29, the N1K2-J was less successful, since its climbing speed was insufficient and the power of the Homare 21 engine fell off rather rapidly at higher altitudes.

A two-seat trainer version, the N1K2-K Shiden Kai Rensen (Violet Lightning Modified Fighter Trainer) was planned, but only a few examples were produced by fitting a second seat behind the pilot's seat of some existing N1K2-J airframes.

The Shiden Kai had its center of gravity too far aft, and to correct this problem the N1K3-J Shiden Kai 1 Model 31 was built, which had the Homare 21 engine moved forward six inches. This freed up enough space to permit two 13.2-mm machine guns to be fitted in the engine cowling. Two prototypes were built at Himeji, but this model was never put into production.

The N1K3-A Shiden Kai 2 Model 41 was a carrier-based variant of the N1K3-J. It too was never put into production.

In an attempt to overcome some of the operational problems caused by the still unreliable Homare 21, the N1K4-J Shiden Kai 3 Model 32 and its carrier-borne variant the N1K4-A Shiden Kai 4 Model 42 were developed. These were powered by the 2000 hp NK9H-S Homare 23 fuel-injected radial. Two prototypes of the N1K4-J and one of the N1K4-A were built in the spring of 1945 at Naruo. The carrier-based aircraft was accepted for production as the Shiden 41, but was later abandoned since by that time Japan's carrier forces had been completely destroyed.

One of the weaknesses of the Shiden Kai was its rather lackluster high-altitude performance. It had proven to be ineffective against the B-29 owing to its poor climbing ability. In search of better high-altitude performance, the N1K5-J Shiden Kai 5 Model 25 was planned, powered by a 2200-hp Mitsubishi MK9A eighteen-cylinder air-cooled radial. However, the sole prototype of the N1K5-J was destroyed prior to completion during a B-29 raid in June of 1945. Another high-altitude interceptor version of the Shiden Kai was to be based on a Homare 44 engine equipped with a three-speed mechanical supercharger. The end of the Pacific War brought an end to all these projects.

Only 415 production examples of the outstanding N1K2-J fighter were built, owing primarily to construction snags and delays resulting from the continuous B-29 raids on the Japanese homeland in the last year of the war. With the exception of Kawanishi's Naruo and Himeji plants, the other companies involved in the production pool were late in getting started and delivered only a token number of machines before the war ended. It is fortunate for the Allies that this outstanding aircraft was not available in greater quantity.