Although most people in Taiwan consider themselves ethnically Han Chinese, many also differentiate themselves into one of two ethnicitie: Taiwanese or Chinese. Because of its historical connection to both China and Taiwan, Japan is occasionally involved in the complex and polemical problems of ethnic identification of the people of Taiwan. The results of this study indicated that favorable attitudes toward Japan relative to China may be predicted by subjective ethnic identification and Taiwanese ideology. Those people who identify themselves as Taiwanese tend to have a more positive perception of Japan relative to China, and attribute the negative behaviors committed by the Japanese during colonization to more positive causes than those who identify themselves as Chinese. Furthermore, ideology related to the pursuit of Taiwan’s independence and political indigenization mediated ethnic identification and favorable attitudes toward Japan. The predictions and results are discussed by referring to Heider’s P-O-X balance theory, cognitive construction of ethnic identification, and selective forgetting of history in order to reconstruct a new ethnic identity.