This chapter explores characteristics of identity formation among Japanese adolescents and young adults living in a cultural context where individualism has been increasingly emphasized even while maintaining collectivism. We argue that, to develop a sense of identity in Japanese culture, adolescents and young adults carefully consider others' perspectives, resolve conflicts between self and others, and, in some cases, merge themselves into relationships and groups rather than pursuing their own uniqueness. However, at the same time, as Japanese society changes in various ways, such as the educational and employment systems, a traditional type of identity may gradually become less functional. A new identity configuration, individualistic collectivism, emerges. We also provide future directions for research toward a more global understanding of identity formation among Japanese adolescents and young adults. © 2012 Wiley Periodicals, Inc.