In 1603, a Tokugawa shogunate (military dictatorship) ushered in a long period of isolation from foreign influence in order to secure its power. For more than two centuries this policy enabled Japan to enjoy stability and a flowering of its indigenous culture. Following the Treaty of Kanagawa with the US in 1854, Japan opened its ports and began to intensively modernize and industrialize. During the late 19th and early 20th centuries, Japan became a regional power that was able to defeat the forces of both China and Russia. It occupied Korea, Formosa (Taiwan), and southern Sakhalin Island.

In 1931-32 Japan occupied Manchuria, and in 1937 it launched a full-scale invasion of China. Japan attacked US forces in 1941 - triggering America's entry into World War II - and soon occupied much of East and Southeast Asia. After its defeat in World War II, Japan recovered to become an economic power and a staunch ally of the US. While the emperor retains his throne as a symbol of national unity, elected politicians - with heavy input from bureaucrats and business executives - wield actual decision-making power. The economy experienced a major slowdown starting in the 1990s following three decades of unprecedented growth, but Japan still remains a major economic power, both in Asia and globally.

Government-industry cooperation, a strong work ethic, mastery of high technology, and a comparatively small defence allocation (1% of GDP) helped Japan advance with extraordinary rapidity to the rank of second most technologically powerful economy in the world after the US and the third-largest economy in the world after the US and China, measured on a purchasing power parity (PPP) basis. One notable characteristic of the economy has been how manufacturers, suppliers, and distributors have worked together in closely-knit groups called keiretsu. A second basic feature has been the guarantee of lifetime employment for a substantial portion of the urban labour force. Both features have now eroded.

The sovereignty dispute over the islands of Etorofu, Kunashiri, and Shikotan, and the Habomai group, known in Japan as the "Northern Territories" and in Russia as the "Southern Kuril Islands," occupied by the Soviet Union in 1945, now administered by Russia and claimed by Japan, remains the primary sticking point to signing a peace treaty formally ending World War II hostilities; Japan and South Korea claim Liancourt Rocks (Take-shima/Tok-do) occupied by South Korea since 1954; China and Taiwan dispute both Japan's claims to the uninhabited islands of the Senkaku-shoto (Diaoyu Tai) and Japan's unilaterally declared exclusive economic zone in the East China Sea, the site of intensive hydrocarbon prospecting