In Itō Sei's (1905–69) “Yūki no machi” (Streets of ghosts, 1937), a narrator returns to his native town of Otaru, Hokkaido, where he experiences a hellish and hallucinatory encounter with people from his past. He is forced to confront shameful aspects of his youthful life that he had tried to repress. In this paper, I propose that a close examination of the story sheds useful light on the real fears, tensions and expectations surrounding colonialism that had become an integral part of Japanese culture and society during the late 1930s. Structures of colonialism, which speak of uneven power relationships between a dominant centre and a distant weaker locality, are spelt out, for example, through the railway network and racist ideology that appear in the story. I also explore the story's depiction of a colonial relationship between mainland Japanese culture centred round Tokyo and the peripheral outpost of Hokkaido. More generally, I suggest that the story illuminates a global power configuration between Japan and its colonies that was entering an increasingly aggressive and bellicose phase during the late 1930s.