To accommodate the historical transition of the civil society and the growing needs of non-government organizations (NGOs) of Japan, Japan had implemented the Nonprofit Organization (NPO) Law, which represented a special set of laws responsible for regulating NGOs. While the NPO Law encouraged many NGOs to apply for NPO status, it also attracted some skepticism. Many believed the NPO Law not only failed to promote NGOs but also impeded their growth. The NPO Law seemed to be beset with many "side effects." Combining the goals and historical context of Japan's NPO Law with the law's contents and the actual state of Japan's civil society, this article analyzed the two-sided effects of Japan's NPO Law on the growth of Japan's civil society. Japan's experience could help China create a better legal system for regulating NGOs.