The Arisaka has enough slop to fire a 30/06
I have two 7.7mm Type 99s, and I can't get the bolts to shut on .30-06 brass (and I'm not going to beat on them to see if it can be forced)
Now, if you personally saw it done, then you saw it done, and I'm not going to dispute you. What I will say, however is that an individual rifle with enough "slop" to allow that is not a good representative of the entire production run.
If one does, but others won't, its not accurate to say the all do...
these kinds of barracks rumors never seem to go away, and once in a while there are actually examples where they are true, so they live on, and on.
In the days of the French & Indian wars, and the Revolution, the British Brown Bess (nominal .72 caliber) could shoot the french .69 caliber balls, but the reverse wasn't true. During WWII, the guys using 82mm mortars could fire the other side's 81mm ammo. But not the reverse.
The one I found most charming was about how the Japanese used "bamboo bullets" so the splinters would cause infection....
Wood bullet training rounds have existed. Swedes used them, so did the Dutch. Possibly the Japanese, I've seen Dutch and Swede ones. Never saw any Japanese ones but they might have existed. All the one's I've seen have been 6.5mm...