Objectives: Workers' compensation in Taiwan is complicated, and it is regulated by various laws; this results in inadequately guaranteed workers' rights to compensation and easy escape from employers' responsibilities. Considering the cultural and socioeconomic similarities between Taiwan and Japan, we examined the institutional arrangements and recognition procedures of the Industrial Accident Compensation Insurance (IACI) of Japan to suggest directions for institutional reform in Taiwan. Methods: The literature about IACI in both Japanese and Chinese including journal articles, books, and official publications was reviewed. Data were analyzed and compared in terms of: (1) institutional evolution, (2) legal basis and administrative organizations, (3) insured population, (4) premiums and financing, (5) benefits, and (6) mechanisms for recognition. Results: IACI in Japan was established on the basis of the IACI Act, and is supervised by the Labor Standards Bureau and prefectural Labor Standards Inspection Offices. All employed workers are covered, and premiums are fully paid by employers. Various types of benefits are provided to the injured workers and their families. The recognition process of occupational injuries and diseases is handled by labor inspection officers. Conclusions: Learning from the experience of IACI in Japan, we believe that a new law is needed to integrate the workers' compensation systems in Taiwan. Coverage should be expanded, the insurance rates should be adjusted reasonably, and benefits should be increased. In addition, the compensation procedures and recognition mechanisms should be simplified and actively assisted by labor inspectors in order to guarantee workers' compensation rights.