This article examines the precarious transition from school to work, considers its relation to young people's identity formation in late modern Japan, and rethinks the theory of identity formation in late modernity. Although Japan's transition system had been efficient and stable over many years, since the late 1990s this has been replaced by an increasing precariousness. The Japanese government has responded with a Career Education promotion policy to foster young people's work aspirations and attitudes in the form of an employability enhancement policy. This policy discourse coincides with a late modernist theory (as put forward by Giddens and Cote & Levine) that emphasises the importance of personal agency for young people's transitions. However, in our longitudinal qualitative study, we found that the "transitional communities and networks" that young people encounter in their transition from school to work have an important supportive role to play. These transitional communities are important in young people's transitions from the school/college community to the workplace community. Those who had a strong sense of agency but no helpful community experienced serious depression and did not make a successful transition into work. Our case studies support Erikson's argument that community (communality) is indispensable for young people's identity formation. We conclude that both community and agency are important for successful transition in late modernity. (Contains 1 figure and 6 notes.)