Although Japan has succeeded in keeping the ratio of health expenditures to the gross domestic product (GDP) constant during the 1980s by reducing prices in the fee schedule, there has been a continuing process of technology diffusion. Analysis of the 1988 and 1991 national claims data shows that there has been an increase in the number of laboratory tests performed per claim, and the frequency of tests was greater if the hospital was large, in the public sector, or attached to a university. The number of CAT scans performed in hospitals also increased between these two years, but there were decreases in X-rays using contrast media and specialized techniques. For drugs, the analysis of which was based on a stratified one-tenth sample of the 1991 data; there was a general tendency among all providers to use newer and more expensive drugs. The practice of trying to absorb health expenditure increases by price reductions has reached its limit. Strategies to make more structural changes are outlined.