The paper proposes a hypothesis that the so-called Japanese-style capitalistic institutions emerged in the postwar Japan partially due to relatively high political contracting costs. Democratic institutions were abruptly established inpostwar Japan as a result of the American Occupation. Consequently, the development of political brokerage markets was lagged behind while the organizational strength of Japan's bureaucracy remained. This uneven political institutional development in postwar Japan caused the increase in political contracting costs. Politicians and specialinterest groups had an incentive to reduce the frequency of dealing directly with bureaucrats. This incentive lead to the establishment of alternative institutions that substituted direct methods to contract witn the state for indirect methods through internalizing mechanisms among themselves.