This paper analyses why the highly developed Japanese system ofschool and undergraduate education seems inversely proportional to studentnumbers proceeding to graduate education. Only a few do proceed. Traditionalattitudes, which are not supportive of graduate education, are shown to stemfrom the view generally taken by the world of business and industry thatgraduate education is not of significance when recruiting staff. Adistinction is, however, drawn between the humanities (in which graduateeducation is seen as appropriate only for those planning an academic career)and more recent developments in the fields of engineering and the naturalsciences indicating a growing recognition of the value of post-graduatetraining. The work of the government University Chartering Commission– the body which authorises the establishment of graduate schools, isdescribed – focusing on its measure to maintain the quality ofgraduate education. The author shows that university-based doctoral studentsmay be at a disadvantage in terms of job-prospects, financial provision andlaboratory-funding in comparison with industry-based students.