Introduction Increasing the energy efficiency of cars, resulting in improved fuel economy, has received attention from time to time in various regions of the world. The main driving forces - today and historically - have been increasing energy prices and concerns about exhaust emissions. Reduced fuel use implies both lower fuel cost and lower emissions of carbon dioxide (CO2). Due to the increasing attention these driving forces receive worldwide, fuel economy improvements form the basis for car manufacturers’ competitiveness in the global market. Fuel economy regulation is no doubt one of the factors that influence, direct and strengthen the fuel economy of cars, and such regulation has hitherto been implemented at regional or national levels. A prominent example is Japan, which plays a dominant role in the car industry while also having a strong tradition of fuel economy regulation. The purpose of this chapter is to explain how the development of fuel economy regulation for cars in Japan was achieved. This is contrasted with corresponding regulation in the United States and the European Union (EU). Implications of the regulations for the Japanese car industry are proposed, and other potentially influential factors are discussed. The data used for analysis are collected through related documents, including official government reports and policy papers by non-governmental organizations (NGOs) and research institutes, as well as interviews conducted with government officials and the car industry. First, this chapter looks at how the decision process of Japanese fuel economy regulations, which can be characterized as ‘co-regulation’ between the government and the industry, has backed up the development. Second, we analyse how fuel economy regulation of Japan’s major car export markets - the United States and the EU - has encouraged sustainable technological innovation in the Japanese industry. Third, other influential factors than fuel economy regulation, such as the oil price, regulation of pollutant emissions, economic incentives and industry strategies, are discussed. Finally, some concluding remarks summarize the key points of the chapter.