Japan is launching an ambitious ten-year nanotechnology project, the goal of which is the ''ultimate manipulation of atoms and molecules''. An important aspect of this project is the use of the scanning tunneling microscope (STM) to modify materials on the nanometer scale. Another five-year Japanese project devoted entirely to STM-controlled atom-scale fabrication is already nearing completion. Japanese industrial laboratories have also produced some outstanding results in this area of research. This article reviews recent Japanese efforts in STM-based nanotechnology and attempts to put these in a worldwide perspective.