There is a burgeoning literature in health economic evaluation, with this form of analysis becoming increasingly influential at the health policy making level in a number of countries. However, a search of the literature reveals that in Japan, the world's second largest health care market, very little health economic evaluation has been undertaken. The main reason for the lack of interest in economic evaluation is that the fee-for-service and strict price regulation that characterises the system of health care financing in Japan is not conducive to this form of analysis. Moreover, the government and many researchers are satisfied that the current organisation of health care has given long life and low infant mortality at low cost. Even if it is accepted that low health care costs and good health prevail in Japan, slower economic growth rates, an ageing population and the development of new medical technologies will place increasing pressure on health care resources and will necessitate a more rational use of these resources. Good economic evaluation, by weighing benefits against costs, has an important role to play.