The purpose of this paper is to clarify Japan`s distribution policy on the Large-Scale Retail Stores Location Law that has been enforced since 2000 when the Large-Scale Retail Stores Law was abolished. The distribution policy of Japan has changed from Large-Scale Retail Stores Law that in favor of the small and medium-sized retailers into the policy of Large-Scale Retail Stores Location Law which purports to protect the local resident environment concerning noise, parking space and waste disposal. This study focuses on this law with reference to reference materials and minutes submitted to joint meeting of the Small and Medium Enterprise Agency, and the Ministry of Economy, Trade and Industry for the revision of the indicator of Large-Scale Retail Stores Location Law. The small and medium-sized retailer groups and the large-scale store groups are conflicting with each other over this law`s indicator. The small and medium-sized retailer groups demand expansion of the range in which the law applies and strengthening environmental standards of the law. By contrast, the large-scale retailer groups demand reduction of the range and ask government to let them informed of the specific details of the law in advance. On the other hand, some local governments are on the way developing ordinances to concerning including large-scale stores. The large-scale retailers strongly oppose to this kind of ordinance by the local government which interferes with a clear specification of the criterion. The government has not provided the clear standard of the noise, parking space, and waste. The government is more concerned about environmental impact on the residents in the regional area than the adjustment of the number of the stores for the small and medium-sized retailers. The distribution policy of Japan aims to create a compact, lively city, with its emphasis on developing the old downtown while restraining expansion of the suburban areas.