Abstract
Institutional design of national forest policy in Japan remains that of industrial policy. The forest policy and its projects are not checked about environmental impact based on scientific knowledge. Local forest environment tax, however, provided local government with discretionary power to implement environmental policy. As a result, local government, freed from the constraints of existing administrative and fiscal systems, could adopt environmental policy into forestry sector. Especially, Shiga Prefecture made monitoring system like adaptive management that covered limit of scientific knowledge and dealt with scientific uncertainty. The system contributes to effectiveness of environmental policy.