The number of bus passenger has been decreasing in Japan since 1969. The increase in car ownership and development in urban rapid rail network has deprived bus service of passengers. The bus industry has suffered from depression for the last twenty years. However, many bus routes are still operated commercially. The amount of external subsidies is not large. The industry is under strict regulation. The common way for bus operators has been to increase fares rapidly in order to keep their break even condition. The first half of the paper describes present circumstances of the bus industry in more details. Then the second half of the paper treats the estimation of the effect of each factor on bus demand by using pooled data in Japanese medium sized cities. The results suggest that the increase in car ownership has had a crucial effect on local public transport demand and is likely to continue to do so.