Growing labor market inequality in Korea and Japan is often blamed on increased trade competition with China, the information technology revolution, and aging populations. This study shows that labor market inequality is not simply driven by such structural changes but by the nature of the ways in which new labor market regulations were created and the resulting regulatory contradictions. Although its state-centric strategies designed new labor market regulation favoring marginal workers, the Korean government failed to resolve labor market inequality. This is because the government's new regulatory goal was not backed by sufficient policy resources or adequately coordinated with other policy areas. Conversely, Japanese authorities prioritized the employment stability of regular workers on the basis of consensus among labor and business groups and the government. However, this narrow goal continues to inhibit progress in closing the gap of labor market inequality.