This article analyzes the status quo of Japanese steel industry, summarizes its unique competitive advantages, and describes its current challenges and new strategies. Particularly, the paper carefully studies the merger and acquisition model of the industry. As China is transforming from a "big" to a "strong" steel maker, it is necessary to learn relevant experience from Japan. For China steel industry,we propose to solve the over-supply problem to reach supply-demand equilibrium; to develop global strategy through forming strategic alliance; to support SMEs to balance the industry organizational structure; and to promote technology innovation to speed up the structural adjustment process. <<