A two-layer numerical model driven by the wind stress is used to explain the observed annual variation of the Kuroshio transport south of Japan. Special attention is given to the effect of a ridge, representing the Izu-Ogasawara Ridge, on the generation of the baroclinic activity through the coupling of the barotropic and baroclinic modes of motion. When the annual variation is concerned, the lower-layer motion remains in areas surrounding the ridge because isostasy (a state of motionless in the lower layer) is not achieved within such a short timescale. Thus, the lower-layer flow impinges on the bottom slope. This impinging process generates anomalies of the upper-layer thickness especially on the eastern side of the ridge. Thereafter, anomalies move westward with characteristic velocities composed of the vertically averaged flow and westward propagation of the long baroclinic Rossby-wave. As anomalies of the upper-layer thickness move westward above the ridge, isostasy is accomplished rapidly and locally with respect to these anomalies. Therefore, the positive (negative) anomaly of the upper-layer thickness has the information of the positive (negative) anomaly of the volume transport when it reaches the western edge of the ridge. Hence, anomalies of the volume transport are released to the west of the ridge. This experiment shows that the annual range of the volume transport east of the ridge is around 40 Sv. This value is nearly equal to the estimate of the Sverdrup transport there. The annual range west of the ridge, however, reduces to around 10 Sv, which is mostly caused by the baroclinic activity generated above the ridge.