The present paper reports how stand size–structure dynamics due to competition between different-sized trees affect long-term forested water balance in Japanese cool-temperate planted stands (evergreen coniferous Cryptomeria japonica and deciduous coniferous Larix kaempferi stands) using a fully coupled multi-layered meteorological surface physics—terrestrial ecosystems model. The simulation captured the well-known annual variation in leaf area index (LAI) accurately with stand age in monocultured and even-aged stands; the occurrence of maximum LAI during the early growth stage and then a gradual decline followed by a steady state after the maximum LAI. The simulations also detected a high dependency of annual evapotranspiration (AETr) on LAI with stand age that is well known by prior observational researches. In the C. japonica (shade-tolerant late-successional species) stand, the relationship between annual net primary productivity of an individual tree (NPP ind) and individual tree mass ( w ) changed from linear to a convex curve during self-thinning, indicating that the degree of asymmetric tree competition intensified with forest stand development. The higher degree of competitive asymmetry characterized by the convex-shaped NPP ind – w relationship produced greater size inequality, i.e., the formation of trees stratified by height. Under such conditions, AETr and annual transpiration (ATr) were mainly regulated by larger trees. On the other hand, the NPP ind – w relationships in the L. kaempferi (shade-intolerant early-successional species) stand were linear throughout the simulated period, indicating the lower degree of competitive asymmetry. Under such conditions, the growth of intermediate-sized trees was enhanced and these trees became a dominant source of AETr (and also ATr) during self-thinning. Furthermore, the sensitivity analysis of the effects of ecophysiological parameters such as foliage profile (i.e., vertical distribution of leaf area density) of an individual tree (distribution pattern is described by the parameter η), the maximum carboxylation velocity ( V cmax0) and biomass allocation pattern of individual plant growth ( μ 1) on AETr, ATr and annual runoff (AR off) showed that the temporal trends of AETr, ATr, AR off and NPP ind – w relationships were completely the same as those in the control simulations. However, the NPP ind – w relationship during self-thinning indicated higher degrees of competitive asymmetry when η or V cmax0 were greater than those in the control simulation and generated greater AETr and ATr and thus smaller AR off. We found that more asymmetric tree competition brings about greater size inequality between different-sized trees and thus more evapotranspiration and less runoff in a forest stand. Overall, our simulation approach revealed that not only LAI dynamics but also plant competition, and thus size–structure dynamics, in a forest ecosystem are essential to long-term future projections of forested water balance.