Taking advantage of what have been learned about “Japanese collectivism,” this chapter theoretically examines cultural stereotype, which is a simplified and distorted image of a culture. The cultural stereotype tends to create the following four basic illusions: uniformity (“The Japanese are all collectivists”), polarity (“The Japanese are collectivists, whereas the Americans are individualists”), determinacy (“Japanese culture causes Japanese collectivism”), and permanency (“Japanese collectivism is immutable”). Contrary to the illusions of uniformity and polarity, actual data typically show large individual difference within each group, and the distributions of individual difference typically have a large overlap between groups. Contrary to the illusion of determinacy, human behavior tends to be affected more strongly by situation than by culture. Contrary to the illusion of permanency, culture as well as human mind and behavior tends to change as a result of intellectual activity and situational change.