The 'Japanese enigma' which concerns this chapter is this: in a society in which the labour movement has been almost continuously excluded from political power and where labour unions are weak, politicized and competitively divided, the political economy nevertheless generates outcomes characteristic of Sweden, Norway and Austria, countries in which class conflict is managed by 'corporatist' arrangements which emerged against a backdrop of political dominance by strong labour movements. The mix of outcomes quintessentially associated with modern social democracy includes longterm full employment and relatively equal distribution of income; and also, in the period following the economic shocks of the early 1970s, successful attempts at stabilization on the basis of organized labour's consent to the sacrifice of immediate wage gains and its use of the strike weapon, for the sake of preserving jobs and reviving investment and growth. Japan shares precisely these features, although, curiously, it lacks one other hallmark of the social democratic model: a big welfare state which plays a major role in the (re)distribution of income and the patterning of ordinary people's life chances and living standards.