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Abstract: This paper aims to rethink creative city theory by analyzing urban regeneration processes in Japan through cultural creativity and social inclusion. The impact of Florida’s theory has led to the common misperception that cities prosper as people of the creative class, such as artists and gays, gather. However, attracting people of the creative class does not automatically make a creative city. Empirical analyses of Kanazawa City, clarify that the creative city needs a ‘culture-based production system’, a well-balanced system of cultural production and cultural consumption that takes advantage of accumulated cultural capital. This paper also examines Osaka City, where creative city policies failed to produce adequate results because they did not take root as a comprehensive urban strategy. However, in spite of these failures, a lively and inclusive grassroots movement has emerged around the creative city. This movement brings Osaka towards being a socially-inclusive creative city. [Copyright &y& Elsevier]