Substantial efforts have been made to regulate pollution in Japan, and the stringency of pollution regulations such as sulfur oxides (SO<SUB>x</SUB>) and nitrogen oxides (NO<SUB>x</SUB>) have continued to increase over years. Technological innovations can play a key role in raising standards of living while improving environmental quality. Well-designed environmental regulations encourage innovation, while poorly designed regulations can inhibit its progress. This study uses patent data as a proxy for technological innovation over 1964 and 2002 and tests the direction of causality between the innovation and environmental regulations. In both of the cases, we find statistically significant effects of the regulations to the innovations. Finally, we test whether higher innovation leads to more stringent environmental regulations and find mixed results. The results suggest that we must be careful to maintain a realistic view of the potential for environmental regulations.