Taoism is believed to be the inspiration for spiritual concepts in Japanese culture. Taoism is similar to Shinto in that it also started as an indigenous religion in China, although it is more hermetic than shamanistic. Taoism's influence can be seen throughout the culture but to a lesser extent than Confucianism.
Taoism in the form it takes in Japan can be easily seen as superstitious or astrological and the concept of demons and spirits seem to have their roots in a Taoist influence such as Onmyōdō and Shugendō. The widely practiced ritual of setsubun (節分) where chanters repeat "Demons out! Luck in!" has its base in Taoism and also touches on a relation to uchi-soto. There is a culture of consultation where ogamiyasan are called upon to provide their Taoism based insight to bear upon events such as house-buildings. Taoism has a calendar whereby one can determine the best day, element and time should be chosen to color an event in the right light (Tengenjutsu (fortune telling)).
The Japanese kanji for Taoism is 道教 (Dô-kyô). The root of this kanji is 道 (michi, way, path) + 教 (kyō, doctrine, teaching, education). Dô shares the same Chinese character as tao, 道 which literally means "way".
According to a tale from the Nihon Shoki, a man named Tajima Mori set out to explore for the elixir of immortality and reached the Eternal Land, where he brought back the “fragrant fruit” to offer to his ruler; the latter turned out to be already dead so Tajima Mori followed suit. “Scholars have identified it as the immortals’ isles of Penglai, and the ‘fragrant fruit’ as the mandarin orange”.
The legal system of China was brought to Japan in the late 7th and early 8th centuries, specifically a Bureau of yin and yang, the Ommyokan, to handle affairs of time keeping, astronomy, dream interpretation and calendar calculation and yin-yang and the Five Phases cosmology. By the 10th century, it developed with rituals to cast away unlucky tendencies and this became known as the religious practice in Japan called inyodo or yin-yang divination.