The objective of this thesis is to analyze the role of Japan in economic liberalization in Laos since 1986. The main point is to study the function of capitalism significantly pushing behind the role of Japan playing in the region countries including Laos which is studied in this thesis. This approach challenges International Relations theories on Realism and Interdependency in studying the role of capitalism. The essence is to analyze the positions of each country in the world capital system, this case; Japan is the core in Asia region while Laos is a peripheral underdevelopment country. Mekong was more significant for being material source and market for Japanese capital after the success of Japan in contributing economic integration to the founder members of ASEAN. For Laos, Japan plays the important role by giving bilateral assistance and through Asian Development Bank (ADB) for merging into Japan core capital system by positioning Laos as the physical link to in Mekong countries and the source of energy security for Greater Mekong Subregion (GMS) members and the founder members of ASEAN further in order to facilitate the function of capitalism system driven by Japan.