Main focus of this paper is process of skill formation, surveying previous literatures on Internal Labor Market(hereafter abridged as ILM) and Occupational Labor Market (hereafter abridged as OLM), particularly focusing on international comparative study. There are some previous studies concerning this theme by Japanese scholars, such as Inagami (1997), The Japan Institute of labour (2003), The Japan Institute for Labour Policy and Training (2009), Ueda (2007), Syokugyodai (2011). However, these discuss mainly the process and structure on vocational education and training (hereafter VET) as foundation of OLM, but they don’t have a perspective on ILM. On the other hand, as regards ILM, there are some case studies on career and skill formation about white-collar career in large firms, such as The Japan Institute of labour (1998), Koike et al. (2002), but they don’t have a perspective on OLM. Characteristics of this paper is to discuss recent trend of ILM and OLM as well as explore political implication for challenges labour market in Japan are facing now, resting on framework by Rubery and Grimshaw (2003) which classifies the UKs labour market as ‘market-led weak, weak ILM/weak OLM approach’ from international perspective. There are similarities between Japan and the UK, where both countries may have some challenges about not only connection’s issues from school to work, but also problems about increasing of nonstandard workers and declining ILM. However, there are some differences in directing policy between two countries. In the UK, there may be political intention to vitalize apprenticeship system as a fundamental of OLM, so as to complement weakening ILM. In Japan, this political idea seems weak, although there is certain amount of policies in Japan. Therefore, we will need to examine how recent situation of OLM and ILM in the UK is, and to analyze which challenges they face and what similarities and differences between Japan and the UK. Being led by these interests, this paper will review concept of OLM and ILM through some previous studies, then present framework of this paper at section 2. Section 3 examines trend of OLM, focusing on apprenticeship system, and section 4 surveys previous studies about ILM, comparing with Japan. Lastly, this report will make a conclusion about our main findings, and discuss some political implication we will expect from our findings at section 5. Conclusion and implication are as follows. 1 Regarding the trend of the Apprenticeship (= OLM), looking at researchers’ evaluations, it cannot be said that they have worked well so far. In this paper, we pointed out the following factors that the apprenticeship did not work well. Firstly, background of the decline of apprenticeship lies in free-riding and poaching by employers, which creates a lack of employer’s commitment. Secondly, many apprentices or FE students on vocational courses are often unable to obtain the necessary work experience to obtain employment, which lower evaluation of VET system and create division between academic education and vocational education. So, at present, it is difficult to judge whether Post-16 Skills Plan can be an effective measure to overcome this division or not soon. Thirdly, apprenticeship depends on stable employment relations. One of important reasons for lack of employer commitment is the changing structure and labour process and the nature of the employment relationships. Fourthly, overcoming poaching, employer’s short-term interests, unstable employment relations need to build social partnerships. Whether apprenticeship as foundation of OLM work well will hinges on social partnership between employers, workers or unions and government. 2 Regarding the trend of ILM, the following was pointed out. Firstly, even in the UK, there are about 30% long-term workers, and the proportion has not changed significantly in the past 10 years and it has been stable. Secondly, in terms of ILM structure, it can be said that the degree of internalization in the UK is somewhat shallower than that of Japan in terms of the retention of the initial career, and the percentage of managers who have changed jobs. Thirdly, the organization structure has been delayered due to recent organization restructuring and downsizing. Opportunities for career promotion in traditional large corporate managers are decreasing, and horizontal movement is emphasized increasingly instead. In that sense the growth of the carrier to the top is constrained and the top of the ILM is thinning. This is a common trend between Japan, the US and the UK. Fourth, the number of college graduates has increased recently, and it is inferred that the initial career path of internship experience from undergraduate age, training skills after joining, and training scheme for graduates in the next few years are becoming commonplace. In that sense the lower part of ILM is formed.