Much research in recent years has analyzed the ecosystem service aspect of forests, while highlighting the need for sustainable forests. Forest management mechanisms at an inter-institutional level in Japan have been identified to hinder the implementation of forest management that is focused on the equal production of ecosystem services. This study presents an institutional analysis of unsustainability risk causality in a private industrial forest in Kochi Prefecture, Japan, from an ecosystem perspective incorporating common ecosystem service hazards that affect the sustainability functions of forests. This was performed with the aim to offer a basis for a less complicated analysis of ecosystem service hazards in industrial forests and to provide causal clarity at different institution levels. It was found that due to Japan's systematic top-down forest management approach with the law at the top, vertical relationships cause direct and indirect negative horizontal relationships at each institutional level. To mitigate vertical and horizontal effects, institutional adaptions must be performed to address a combination of satisfier and hygiene factors. Under current conditions of non-enforceable forest policy, objectives and decisions regarding policy and management instruments at the national level must be integrated. This requires effective and adaptive multi-level institutional governance.