This first Japanese twin study of early literacy development investigated the extent to which genetic and environmental factors influence individual differences in prereading skills in 238 pairs of twins at 42 months of age. Twin pairs were individually tested on measures of phonological awareness, "kana" letter name/sound knowledge, receptive vocabulary, visual perception, nonword repetition, and digit span. Results obtained from univariate behavioral-genetic analyses yielded little evidence for genetic influences, but substantial shared-environmental influences, for all measures. Phenotypic confirmatory factor analysis suggested three correlated factors: phonological awareness, letter name/sound knowledge, and general prereading skills. Multivariate behavioral genetic analyses confirmed relatively small genetic and substantial shared environmental influences on the factors. The correlations among the three factors were mostly attributable to shared environment. Thus, shared environmental influences play an important role in the early reading development of Japanese children. (Contains 7 tables and 1 figure.)