This article examines the Japanese response in terms of innovation capacity and entrepreneurship enhancement under the ever-changing economic environment. Particular focus would go to the interactions among government, industry and universities in the national innovation system at a macro level, and entrepreneurship education at the institutional level. Several key universities were selected for discussion. This article argues that under the urge to supplement the internal research and development capacity of Japanese industry and maintain competitiveness, internationalisation efforts through the strong collaboration among government, universities and industry are essential to further the development of national innovation and entrepreneurship. (Contains 2 figures, 2 tables and 1 note.)