Overcrowding of correctional institutes could be stated as the commonproblem faced around the world. The privatization of prisons not only strikes abalance between supply and demand, it also expands the rooms for prisoners effectively. In order to reduce prisons overcrowding, the first solution plan thatthe governors have in mind is to build more institutes, however, the expenses and costs would worsen states financial problem. It is up until then, thatgovernors around the world realized that by privatization and PFI, making useof the money and professional talents of private sectors could help solve the problem of prisons overcrowding.Follow from the discussions above; this study aims to discuss themeanings and challenges of the privatization of correctional institutes in Japan, and to provide some references and lessons for Taiwan. Study shows that theprivatization of correctional institutes means: (1) the problems of overcrowding could be temporarily solved; (2) the realization of “regional coexistence” ideal;(3) to adopt professional skills from private sectors flexibly to build new correctional institutes; (4) lower financial crisis through public-privatepartnership in order to achieve the goal of financial equilibrium. However, inthe process of privatization, the governors are to cope with different organization cultures and command systems that contradict with each other, theambiguity as to the extent of ones’ responsibility, imperfectly competitivemarket, and the instability of the service system, etc. The author holds that, after observing Japan’s experience, Taiwan could gain some inspirations andreferences from their examples as to the feasibility of letting private sectors to manage correctional institutes, to rethink the ideal, and the repositioning ofmanagement.