Young people like Lim Kim San might not have been very interested in the times, but the times were extremely interested in them. Even as the colonial police were warning him and his fellow-Rafflesians about the insidious threat of Communism, another disaster was in the making: Japan's invasion of Southeast Asia.

World War I had proved to be a windfall for Japan. As Western colonial powers diverted resources away from their possessions in the East, Japan gained political ground by acting as Britain's ally in the regional “power vacuum”. When British warships left Singapore in 1914 to reinforce the European front, the colony's defence fell to the Japanese navy, which played a crucial role in putting down the Indian Mutiny of 1915 in Singapore.

Japan's economic penetration of the region continued as well. Cheap Japanese goods flooded a market starved of European merchandise; retailers, wholesalers, entrepreneurs and speculators entered the fray. In 1922, Eifuku Tora successfully brought modern fishing methods to the colony, and he and others from Kagoshima and Okinawa prefectures ushered in an era of Japanese domination over the local fisheries. Then the aggressively expanding Ishihara Sangyo, which had major mining concerns on the Malay peninsula, opened a Singapore office in 1925.

The closing of American markets during the Great Depression led Japanese manufacturers to look at emerging markets to their south even as the Slump provided economic impetus for an aggressive nationalism. “Japan needed an easily plundered store of raw materials and already had a client kingdom in the Manchukuo, the former Chinese province of Manchuria. But now Nationalist China itself was stirring under the leadership of the mercurial Chiang Kai Shek and began to re-assert its sovereignty in the north.”

Japan's Southeast Asian push continued and fuelled the region's modern economic dynamism. Japanese goods formed the core of the consumer boom in Malaya in the later 1930s. Seeking to corner the market in goods from matchboxes to condensed milk, Japanese firms imported more than half of Malaya's everyday goods, while in Singapore, about 100 motorized fishing boats and 1,500 fishermen supplied the larger proportion of the colony's needs.