Tokyo Underground Railway Co., Ltd. opened Japan's first underground line of the subway Ginza Line on December 30, 1927, and publicized as "the first underground railway in the Orient." The distance of the line was only 2.2 km between Ueno and Asakusa.

The Shōwa Financial Crisis was a financial panic in 1927, during the first year of the reign of Emperor Hirohito of Japan, and was a foretaste of the Great Depression. It brought down the government of Prime Minister Wakatsuki Reijirō and led to the domination of the zaibatsu over the Japanese banking industry.

The Shōwa Financial Crisis occurred after the post–World War I business boom in Japan. Many companies invested heavily in increased production capacity in what proved to be an economic bubble. The post-1920 economic slowdown and the Great Kantō earthquake of 1923 caused an economic depression, which led to the failures of many businesses. The government intervened through the Bank of Japan by issuing discounted "earthquake bonds" to overextended banks. In January 1927, when the government proposed to redeem the bonds, rumor spread that the banks holding these bonds would go bankrupt. In the ensuing bank run, 37 banks throughout Japan (including the Bank of Taiwan), and the second-tier zaibatsu Suzuki Shoten, went under. Prime Minister Wakatsuki Reijirō attempted to have an emergency decree issued to allow the Bank of Japan to extend emergency loans to save these banks, but his request was denied by the Privy Council, and he was forced to resign.

Wakatsuki was succeeded by Prime Minister Tanaka Giichi, who managed to control the situation with a three-week bank holiday and the issuance of emergency loans; however, as a result of the collapse of many smaller banks, the large financial branches of the five great zaibatsu houses dominated Japanese finances until the end of World War II.

The London Naval Treaty, officially the Treaty for the Limitation and Reduction of Naval Armament, was an agreement between the United Kingdom, Japan, France, Italy, and the United States that was signed on 22 April 1930. Seeking to address issues not covered in the 1922 Washington Naval Treaty, which had created tonnage limits for each nation's surface warships, the new agreement regulated submarine warfare, further controlled cruisers and destroyers, and limited naval shipbuilding. Ratifications were exchanged in London on 27 October 1930, and the treaty went into effect on the same day, but it was largely ineffective.

The Japanese government had desired to raise their ratio to 10:10:7, but this proposal was swiftly countered by the United States. Thanks to back-room dealing and other intrigues, though, Japan walked away with a 5:4 advantage in heavy cruisers, but this small gesture would not satisfy the populace of Japan which was gradually falling under the spell of the various ultra-nationalist groups spawning throughout the country. As a result of his failings regarding the London Naval Treaty, Prime Minister Hamaguchi Osachi was shot on November 14, 1930, by an ultranationalist and died in 1931.

The Empire of Japan's Kwantung Army invaded Manchuria on 18 September 1931, immediately following the Mukden Incident. At the war's end in February 1932, the Japanese established the puppet state of Manchukuo. Their occupation lasted until the success of the Soviet Union and Mongolia with the Manchurian Strategic Offensive Operation in mid-August 1945, towards the end of the Second World War.

With the invasion having attracted great international attention, the League of Nations produced the Lytton Commission (headed by British politician Victor Bulwer-Lytton) to evaluate the situation, with the organization delivering its findings in October 1932. Its findings and recommendations that the Japanese puppet state of Manchukuo not be recognized and the return of Manchuria to Chinese sovereignty prompted the Japanese government to withdraw from the League entirely.

The withdrawal from the League of Nations meant that Japan was politically isolated. Japan had no strong allies and its actions had been internationally condemned, whilst internally popular nationalism was booming. Local leaders, such as mayors, teachers, and Shinto priests were recruited by the various movements to indoctrinate the populace with ultra-nationalist ideals. They had little time for the pragmatic ideas of the business elite and party politicians. Their loyalty lay to the Emperor and the military. In March 1932 the "League of Blood" assassination plot and the chaos surrounding the trial of its conspirators further eroded the rule of democratic law in Shōwa Japan. In May of the same year a group of right-wing Army and Navy officers succeeded in assassinating the Prime Minister Inukai Tsuyoshi. The plot fell short of staging a complete coup d'état, but it effectively ended rule by political parties in Japan.

From 1932 to 1936, the country was governed by admirals. Mounting nationalist sympathies led to chronic instability in government. Moderate policies were difficult to enforce. The crisis culminated on February 26, 1936. In what became known as the February 26 Incident, about 1,500 ultranationalist army troops marched on central Tokyo. Their mission was to assassinate the government and promote a "Shōwa Restoration". Prime Minister Okada survived the attempted coup by hiding in a storage shed in his house, but the coup only ended when the Emperor personally ordered an end to the bloodshed.

Within the state, the idea of a Greater East Asian Co-Prosperity Sphere began to foment. The nationalists believed that the "ABCD powers" (Americans, British, Chinese, Dutch) were a threat to all Asians and that Asia could only survive by following the Japanese example. Japan had been the only Asian and non-Western power to industrialize itself successfully and rival great Western empires. While largely described by contemporary Western observers as a front for the expansion of the Japanese army, the idea behind the Co-Prosperity Sphere was that Asia would be united against the Western powers under the auspices of the Japanese. The idea drew influence in the paternalistic aspects of Confucianism and Koshitsu Shinto. Thus, the main goal of the Sphere was the hakkō ichiu, the unification of the eight corners of the world under the rule (kōdō) of the Emperor.

The February 26 Incident (二・二六事件, Ni Ni-Roku Jiken, also known as the 2-26 Incident) was an attempted coup d'état in the Empire of Japan on 26 February 1936. It was organized by a group of young Imperial Japanese Army (IJA) officers with the goal of purging the government and military leadership of their factional rivals and ideological opponents.

Although the rebels succeeded in assassinating several leading officials (including two former prime ministers) and in occupying the government center of Tokyo, they failed to assassinate Prime Minister Keisuke Okada or secure control of the Imperial Palace. Their supporters in the army made attempts to capitalize on their actions, but divisions within the military, combined with Imperial anger at the coup, meant they were unable to achieve a change of government. Facing overwhelming opposition as the army moved against them, the rebels surrendered on 29 February.

Unlike earlier examples of political violence by young officers, the coup attempt had severe consequences. After a series of closed trials, nineteen of the uprising's leaders were executed for mutiny and another forty were imprisoned. The radical Kōdō-ha faction lost its influence within the army, while the military, now free from infighting, increased its control over the civilian government, which had been severely weakened by the assassination of key moderate and liberal-minded leaders.

The Second Sino-Japanese War was a military conflict that was primarily waged between the Republic of China and the Empire of Japan. The war made up the Chinese theater of the wider Pacific Theater of the Second World War. The beginning of the war is conventionally dated to the Marco Polo Bridge Incident on 7 July 1937, when a dispute between Japanese and Chinese troops in Peking escalated into a full-scale invasion. Some Chinese historians believe that the Japanese invasion of Manchuria on 18 September 1931 marks the start of the war. This full-scale war between the Chinese and the Empire of Japan is often regarded as the beginning of World War II in Asia.

China fought Japan with aid from Nazi Germany, the Soviet Union, United Kingdom and the United States. After the Japanese attacks on Malaya and Pearl Harbor in 1941, the war merged with other conflicts which are generally categorized under those conflicts of World War II as a major sector known as the China Burma India Theater. Some scholars consider the European War and the Pacific War to be entirely separate, albeit concurrent, wars. Other scholars consider the start of the full-scale Second Sino-Japanese War in 1937 to have been the beginning of World War II. The Second Sino-Japanese War was the largest Asian war in the 20th century. It accounted for the majority of civilian and military casualties in the Pacific War, with between 10 and 25 million Chinese civilians and over 4 million Chinese and Japanese military personnel missing or dying from war-related violence, famine, and other causes. The war has been called "the Asian holocaust."

The war was the result of a decades-long Japanese imperialist policy to expand its influence politically and militarily in order to secure access to raw material reserves, food, and labor. The period after World War I brought about increasing stress on the Japanese policy. Leftists sought universal suffrage and greater rights for workers. Increasing textile production from Chinese mills was adversely affecting Japanese production and the Great Depression brought about a large slowdown in exports. All of this contributed to militant nationalism, culminating in the rise to power of a militarist faction. This faction was led at its height by the Hideki Tojo cabinet of the Imperial Rule Assistance Association under edict from Emperor Hirohito. In 1931, the Mukden Incident helped spark the Japanese invasion of Manchuria. The Chinese were defeated and Japan created a new puppet state, Manchukuo; many historians cite 1931 as the beginning of the war. From 1931 to 1937, China and Japan continued to skirmish in small, localized engagements, so-called "incidents".

In December 1941, Japan launched a surprise attack on Pearl Harbor, and declared war on the United States. The United States declared war in turn and increased its flow of aid to China – with the Lend-Lease act, the United States gave China a total of $1.6 billion ($18.4 billion adjusted for inflation). With Burma cut off it airlifted material over the Himalayas. In 1944, Japan launched Operation Ichi-Go, the invasion of Henan and Changsha. However, this failed to bring about the surrender of Chinese forces. In 1945, the Chinese Expeditionary Force resumed its advance in Burma and completed the Ledo Road linking India to China. At the same time, China launched large counteroffensives in South China and retook West Hunan and Guangxi. Japan formally surrendered on 2 September 1945. China was recognized as one of the Big Four Allies during the war, regained all territories lost to Japan and became one of the five permanent members of the United Nations Security Council.

National Mobilization Law was legislated in the Diet of Japan by Prime Minister Fumimaro Konoe on 24 March 1938 to put the national economy of the Empire of Japan on war-time footing after the start of the Second Sino-Japanese War.

The National Mobilization Law had fifty clauses, which provided for government controls over civilian organizations (including labor unions), nationalization of strategic industries, price controls and rationing, and nationalized the news media. The laws gave the government the authority to use unlimited budgets to subsidize war production, and to compensate manufacturers for losses caused by war-time mobilization. Eighteen of the fifty articles outlined penalties for violators.

The law was attacked as unconstitutional when introduced to the Diet in January 1938, but was passed due to strong pressure from the military and took effect from May 1938.

The National Service Draft Ordinance (国民徴用令, Kokumin Chōyō rei) was a supplemental law promulgated by Prime Minister Konoe as part of the National Mobilization Law. It empowered the government to draft civilian workers to ensure an adequate supply of labor in strategic war industries, with exceptions allowed only in the case of the physically or mentally disabled.

The program was organized under the Ministry of Welfare, and at its peak 1,600,000 men and women were drafted, and 4,500,000 workers were reclassified as draftees (and thus were unable to quit their jobs). The Ordinance was superseded by the National Labor Service Mobilization Law in March 1945, which was in turn abolished on 20 December 1945 by the Supreme Commander of the Allied Powers after the surrender of Japan.

The United States detonated two atomic bombs over the Japanese cities of Hiroshima and Nagasaki on 6 and 9 August 1945, respectively. The two bombings killed between 129,000 and 226,000 people, most of whom were civilians, and remain the only use of nuclear weapons in armed conflict.

The consent of the United Kingdom was obtained for the bombing, as was required by the Quebec Agreement, and orders were issued on 25 July by General Thomas Handy, the acting Chief of Staff of the United States Army, for atomic bombs to be used against Hiroshima, Kokura, Niigata, and Nagasaki. On 6 August, a Little Boy was dropped on Hiroshima, to which Prime Minister Suzuki reiterated the Japanese government's commitment to ignore the Allies' demands and fight on. Three days later, a Fat Man was dropped on Nagasaki. Over the next two to four months, the effects of the atomic bombings killed between 90,000 and 146,000 people in Hiroshima and 39,000 and 80,000 people in Nagasaki; roughly half occurred on the first day. For months afterward, many people continued to die from the effects of burns, radiation sickness, and injuries, compounded by illness and malnutrition. Though Hiroshima had a sizable military garrison, most of the dead were civilians.

With the defeat of the Empire of Japan, the Allied Powers dissolved it and placed the territories under occupation. The Soviet Union was made responsible for North Korea, and annexed the Kuril Islands and the southern portion of the island of Sakhalin. The United States took responsibility for the rest of Japan's possessions in Oceania and took over South Korea. China, meanwhile, plunged back into its civil war, with the Communists in control by 1949.

On 3 May 1947, the Constitution of Japan went into effect. This changed the Empire of Japan into the State of Japan (Nihon Koku, 日本国) with a liberal democracy. Japan's military was disarmed completely and the absoluteness of the emperor was repealed by the Post-war Constitution. Article 9 turned Japan into a pacifist country without a military.

Shigeru Yoshida was elected as Prime Minister of Japan from 1946 to 1947 and from 1948 to 1954. His policy, known as the "Yoshida Doctrine", emphasized military reliance on the United States and promoted unrestrained economic growth. On 8 September 1951, the US-led Allied Occupation of Japan ended after the signing of the Treaty of San Francisco, which became effective on April 28, 1952. It restored the sovereignty of Japan. On the same day, the Security Treaty Between the United States and Japan was signed as Cold War tensions rose; it was later replaced by the 1960 Treaty of Mutual Cooperation and Security Between the United States and Japan. The 1960 treaty requires the U.S. to protect Japan from external aggression. It allows United States forces to be stationed in Japan. Meanwhile, Japanese ground and maritime forces deal with internal threats and natural disasters. This established the U.S.–Japan alliance.

By the late 1940s, there were two conservative parties (the Democratic Party and Liberal Party); after a series of mergers, they came together in 1955 as the Liberal Democratic Party (LDP). By 1955, the political system stabilized in what was called the 1955 System. The two chief parties were the conservative LDP and the leftist Social Democratic Party. Throughout the period 1955 to 2007, the LDP was dominant (with a brief interlude in 1993–94). The LDP was pro-business, pro-American, and had a strong rural base.

The Japanese economic miracle refers to Japan's record period of economic growth between the post-World War II era and the end of the Cold War. During the economic boom, Japan rapidly became the world's second-largest economy (after the United States). By the 1990s, Japan's population demographics had begun to stagnate, and the workforce was no longer expanding as quickly as it had in the previous decades despite per-worker productivity remaining high.

On 1 July 1954, the Self-Defense Forces Act (Act No. 165 of 1954) reorganized the National Security Board as the Defense Agency on July 1, 1954. Afterward, the National Security Force was reorganized as the Japan Ground Self-Defense Force (GSDF). The Coastal Safety Force was reorganized as the Japan Maritime Self-Defense Force (JMSDF). The Japan Air Self-Defense Force (JASDF) was established as a new branch of the JSDF. These are the de facto postwar Japanese army, navy and air force.

Japan joins the United Nations

The Anpo protests were a series of massive protests throughout Japan from 1959 to 1960, and again in 1970, against the United States–Japan Security Treaty, which is the treaty that allows the United States to maintain military bases on Japanese soil. The name of the protests comes from the Japanese term for "Security Treaty," which is Anzen Hoshō Jōyaku, or just Anpo for short.

The protests in 1959 and 1960 were staged in opposition to a 1960 revision of the original 1952 Security Treaty, and eventually grew to become the largest popular protests in Japan's modern era. At the climax of the protests in June 1960, hundreds of thousands of protestors surrounded Japan's National Diet building in Tokyo on nearly a daily basis, and large protests took place in other cities and towns all across Japan.

On June 15, protestors smashed their way into the Diet compound itself, leading to a violent clash with police in which a female Tokyo University student, Michiko Kanba, was killed. In the aftermath of this incident, a planned visit to Japan by US president Dwight D. Eisenhower was cancelled, and conservative prime minister Nobusuke Kishi was forced to resign.

The Tōkaidō Shinkansen began service on 1 October 1964, in time for the first Tokyo Olympics. The conventional Limited Express service took six hours and 40 minutes from Tokyo to Osaka, but the Shinkansen made the trip in just four hours, shortened to three hours and ten minutes by 1965. It enabled day trips between Tokyo and Osaka, the two largest metropolises in Japan, significantly changed the style of business and life of the Japanese people, and increased new traffic demand. The service was an immediate success, reaching the 100 million passenger mark in less than three years on 13 July 1967, and one billion passengers in 1976. Sixteen-car trains were introduced for Expo '70 in Osaka. With an average of 23,000 passengers per hour in each direction in 1992, the Tōkaidō Shinkansen was the world's busiest high-speed rail line. As of 2014, the train's 50th anniversary, daily passenger traffic rose to 391,000 which, spread over its 18-hour schedule, represented an average of just under 22,000 passengers per hour. The first Shinkansen trains, the 0 series, ran at speeds of up to 210 km/h (130 mph), later increased to 220 km/h (137 mph).

The 1964 Summer Olympics were an international multi-sport event held from 10 to 24 October 1964 in Tokyo, Tokyo was chosen as the host city during the 55th IOC Session in West Germany on 26 May 1959. The 1964 Summer Games were the first Olympics held in Asia. The 1964 Games were also the first to be telecast internationally without the need for tapes to be flown overseas, as they had been for the 1960 Olympics four years earlier. These were also the first Olympic Games to have color telecasts, albeit partially. Certain events such as the sumo wrestling and judo matches, sports popular in Japan, were tried out using Toshiba's new colour transmission system, but only for the domestic market. The entire 1964 Olympic Games was chronicled in the ground-breaking 1965 sports documentary film Tokyo Olympiad, directed by Kon Ichikawa. The games were scheduled for mid-October to avoid the city's midsummer heat and humidity and the September typhoon season.

The Treaty on Basic Relations Between Japan and the Republic of Korea was signed on June 22, 1965. It established basic diplomatic relations between Japan and South Korea.

The Koza riot was a violent and spontaneous protest against the US military presence in Okinawa, which occurred on the night of December 20, 1970, into the morning of the following day. Roughly 5,000 Okinawans clashed with roughly 700 American MPs in an event which has been regarded as symbolic of Okinawan anger against 25 years of US military occupation. In the riot, approximately 60 Americans and 27 Okinawans were injured, 80 cars were burned, and several buildings on Kadena Air Base were destroyed or heavily damaged.

The Okinawa Reversion Agreement was an agreement between the United States and Japan in which the United States relinquished in favor of Japan all rights and interests under Article III of the Treaty of San Francisco, which had been obtained as a result of the Pacific War, and thus return the Okinawa Prefecture to Japanese sovereignty. The document was signed simultaneously in Washington, DC, and Tokyo on June 17, 1971, by William P. Rogers on behalf of United States President Richard Nixon and Kiichi Aichi on behalf of Japanese Prime Minister Eisaku Satō. The document was not ratified in Japan until November 24, 1971, by the National Diet.

Walkman is a brand of portable audio players manufactured and marketed by Japanese technology company Sony since 1979. The original Walkman was a portable cassette player and its popularity made "walkman" an unofficial term for personal stereos of any producer or brand. By 2010, when production stopped, Sony had built about 200 million cassette-based Walkmans.The Walkman brand was extended to serve most of Sony's portable audio devices, including DAT players, MiniDisc players/recorders, CD players (originally Discman then renamed the CD Walkman), transistor radios, mobile phones, and digital audio/media players. As of 2011, the Walkman range consists exclusively of digital players.

Japan became the biggest motor vehicle producing country in the world with 11,042,884 motor vehicles compared to the USA's 8,009,841.

The beginning of 1980s saw the introduction of Japanese anime into the American and western culture. In the 1990s, Japanese animation slowly gained popularity in the United States.

In the 1960s, manga artist and animator Osamu Tezuka adapted and simplified Disney animation techniques to reduce costs and limit frame counts in his productions. Originally intended as temporary measures to allow him to produce material on a tight schedule with an inexperienced staff, many of his limited animation practices came to define the medium's style. Three Tales (1960) was the first anime film broadcast on television; the first anime television series was Instant History (1961–64). An early and influential success was Astro Boy (1963–66), a television series directed by Tezuka based on his manga of the same name. Many animators at Tezuka's Mushi Production later established major anime studios (including Madhouse, Sunrise, and Pierrot).

The 1970s saw growth in the popularity of manga, many of which were later animated. Tezuka's work—and that of other pioneers in the field—inspired characteristics and genres that remain fundamental elements of anime today. The giant robot genre (also known as "mecha"), for instance, took shape under Tezuka, developed into the super robot genre under Go Nagai and others, and was revolutionized at the end of the decade by Yoshiyuki Tomino, who developed the real robot genre. Robot anime series such as Gundam and Super Dimension Fortress Macross became instant classics in the 1980s, and the genre remained one of the most popular in the following decades. The bubble economy of the 1980s spurred a new era of high-budget and experimental anime films, including Nausicaä of the Valley of the Wind (1984), Royal Space Force: The Wings of Honnêamise (1987), and Akira (1988).

Neon Genesis Evangelion (1995), a television series produced by Gainax and directed by Hideaki Anno, began another era of experimental anime titles, such as Ghost in the Shell (1995) and Cowboy Bebop (1998). In the 1990s, anime also began attracting greater interest in Western countries; major international successes include Sailor Moon and Dragon Ball Z, both of which were dubbed into more than a dozen languages worldwide. In 2003, Spirited Away, a Studio Ghibli feature film directed by Hayao Miyazaki, won the Academy Award for Best Animated Feature at the 75th Academy Awards. It later became the highest-grossing anime film, earning more than $355 million. Since the 2000s, an increased number of anime works have been adaptations of light novels and visual novels; successful examples include The Melancholy of Haruhi Suzumiya and Fate/stay night (both 2006). Demon Slayer: Kimetsu no Yaiba the Movie: Mugen Train became the highest-grossing Japanese film and one of the world's highest-grossing films of 2020. It also became the fastest grossing film in Japanese cinema, because in 10 days it made 10 billion yen ($95.3m; £72m). It beat the previous record of Spirited Away which took 25 days.

In 1985, the home video game industry was revitalized by the widespread success of the Nintendo Entertainment System. The success of the NES marked a shift in the dominance of the video game industry from the United States to Japan during the third generation of consoles.

The demise of the government-owned system came after charges of serious management inefficiencies, profit losses, and fraud. By the early 1980s, passenger and freight business had declined, and fare increases had failed to keep up with higher labor costs.

Japanese National Railways is privatized and split into seven JR (Japan Railways) companies, six regional companies and one freight. 

The new companies introduced competition, cut their staffing, and made reform efforts. Initial public reaction to these moves was good: the combined passenger travel on the Japan Railways Group passenger companies in 1987 was 204.7 billion passenger-kilometers, up 3.2% from 1986, while the passenger sector previously had been stagnant since 1975. The growth in passenger transport of private railways in 1987 was 2.6%, which meant that the Japan Railways Group's rate of increase was above that of the private-sector railways for the first time since 1974. Demand for rail transport improved, although it still accounted for only 28% of passenger transportation and only 5% of cargo transportation in 1990. Rail passenger transportation was superior to automobiles in terms of energy efficiency and of speed in long distance transportation.

On 7 January 1989, Emperor Shōwa, the 124th Emperor of Japan according to the traditional order of succession, died in his sleep at 6:33 am JST after suffering from intestinal cancer for some time. He was 87 years old. The late emperor's state funeral was held on 24 February, when he was buried near his parents at the Musashi Imperial Graveyard in Hachiōji, Tokyo.

The Emperor was succeeded by his eldest son, Akihito, whose enthronement ceremony was held on 12 November 1990. The Emperor's death ended the Shōwa era. On the same day a new era began: the Heisei era, effective at midnight the following day. From 7 January until 31 January, the Emperor's formal appellation was "Departed Emperor." His definitive posthumous name, Shōwa Tennō, was determined on 13 January and formally released on 31 January by Toshiki Kaifu, the prime minister.