The aim of this study is to examine the rationale for, and methods of, funding private universities with public money in Japan. In the mid-1970s, the National Parliament passed the first law in its history that permitted the allocation of taxpayers’ money to private colleges and universities. Lawmakers justified this action on the premise that over 75% of Japanese students were attending private institutions and that these institutions were facing great financial difficulties. However, the passing of the law created a whole new series of controversies and arguments among scholars and edu-cators with regard to the mechanisms of funding, accountability, and autonomy of higher education institutions that received taxpayer money.