The establishment of Japanese colonial and military presence in China can be traced back to Japan’s victory in the First Sino-Japanese War. The subsequent Treaty of Shimonoseki was signed in 1895, granting Japan most-favoured-nation treatment and access to all existing treaty ports in China. This treaty, along with the Treaty of Commerce and Navigation of July 1896 and the Boxer Protocol of 1901, elevated Japan to an equal status with western imperialist powers that had established a foothold in China during the 19th century. Significantly, these three treaties allowed Japanese citizens to gain the rights of trade, residence, manufacture, and travel enjoyed by citizens of other treaty powers. Enticed by privileges granted to them in China, increasing numbers of Japanese settled in treaty port settlements.

In Shanghai, a large Japanese community emerged around the Japanese consulate within the Shanghai International Settlement. As Mo Ya-jun helpfully points out in her dissertation, there are several reasons as to why Japan did not press for a concession of her own in the metropolis. The first was that all the land close to the main business hubs was already occupied by the western powers. There was, indeed, so little land to be parcelled out around Shanghai that the Chinese offer for a Japanese concession in Yangshupu district conflicted with Shanghai Municipal Council (SMC, a multinational governing body in charge of the administration of the Shanghai International Settlement) desires to expand the Settlement into the very district. As newcomers, the Japanese were hesitant to create conflict with the western Shanghailanders and turned down the Chinese offer. At the same time, to establish a concession further away from the International Settlement was to forgo the very economic benefits that drove the Japanese decision to establish a foothold in Shanghai. Finally, there was already an existing Japanese community in the district of Hongkou. It would be counterintuitive to force them to move away from pre-existing businesses and networks. To this end, it was decided that Japan would set up presence within the Shanghai International Settlement.

By 1932, there were around 26,000 to 30,000 Japanese living in the Hongkou district of Shanghai, which had earned the nickname ‘Little Tokyo’. Such a large population, the Japanese (and to be fair, other imperialist powers as well) claimed, required protection by a significant military presence. The legality of Japanese armed forces in China was dubious, as Peattie notes:

Like most of the Western treaty powers, Japanese naval and military units in the treaty ports based their existence on one or the other of two claims: arrangements under formal treaty or claim of military necessity, specifically the protection of Japanese nationals and interests in time of trouble. While Japan's one permanent garrison in the treaty ports was based on the former sanction, the Japanese naval presence, like that of the West, could only be justified by the claims of military necessity, since there were no formal treaty arrangements covering foreign naval forces in Chinese waters.

Naturally, such claims were rejected by respective Chinese governments. Despite a military presence in almost every single Japanese concession, the only legally guaranteed one was the China Garrison Army based around Tianjin (elements of this army kicked off the Marco Polo Incident on 7 July, 1937). Indeed, as pointed out by Barbara J. Brooks, even the presence of Japanese colonial police in China was a sore point to the Chinese. The stationing of Japanese police and military units in China represented to Chinese officials the nation’s inability to maintain sovereignty within her own nominal territory.

Generally, the defence of concessions in China was divided between the Imperial Japanese Army and the Imperial Japanese Navy in characteristic pre-war military dysfunctionality. Concessions in North China were defended by Army units, while those in Central and South China were under the protection of the Navy. In Shanghai, the Navy’s defence took the form of the Shanghai Naval Landing Party. As early as 1884, two Japanese warships were stationed in Shanghai, which was duly expanded to something of a mini-fleet by the 1930s. Of course, ships are extremely unsuitable for the protection of urban areas ashore, so landing parties (rikusentai) were necessary to handle any disputes between Japanese and Chinese citizens. At first, these were ad-hoc contingents drawn from gunboat crews, but were soon expanded into larger and more heavily-armed units named ‘special landing parties’ (tokubetsu rikusentai). By 1927, the Special Naval Landing Party had established permanent residency in Shanghai, and was assigned permanent defence of the Japanese sector by the Shanghai Municipal Council, which was slowly coming under Japanese control. The Special Naval Landing Party was assisted in its operations by local paramilitary groups such as the Imperial Military Reservists Association, whose members participated in the military clashes of 1932.

The Shanghai War of 1932, also known as the January 28 Incident, was a result of growing tensions between China and Japan on local, regional and national levels. For Japan, their caucus belli was an attack on five Japanese monks by a group of Chinese. This was later revealed to be a deliberate provocation by Kwantung Army members who wished to incite a general conflict between Japan and China - the Chinese attackers were paid by Major Tanaka Ryukichi. The Cantonese troops of the Guominjun (the Guomindang party’s National Revolutionary Army) 19th Route Army edged closer to Hongkou district to prevent Japanese vigilantes and naval parties from entering the neighbouring Zhabei district. Pressured both locally and nationally for a strong response (notably, one of the threats the Shanghai Japanese Residents’ Association made was that they would turn to the Imperial Japanese Army for aid instead), the Special Naval Landing Party marched out of Hongkou on 28 January, 1932, after a “cigarette bomb” was tossed at the Japanese consulate. This kicked off a week-long military clash between Chinese and Japanese army and naval elements in Shanghai. The Special Naval Landing Party of around 2,000 men were quickly reinforced by three Imperial Japanese Army divisions, which won a hard-fought tactical victory over the Guominjun 19th Route and 5th Armies.

Following the January 28 Incident, the Special Naval Landing Party became an even more prominent fixture in Shanghai. The unit established permanent barracks covering two city blocks. Reinforced with granite, it was practically a fortress capable of holding 2,000 men as well as tanks and armoured cars, and would become a key Japanese strongpoint during the Battle of Shanghai in 1937. Naval troops were free to hold manoeuvres within Hongkou, and ran the district as a de-facto exclusive Japanese concession from 1932-1937. The Special Naval Landing Party of Shanghai would continue to carry out operations as part of the China Theatre Fleet throughout the Second Sino-Japanese War until its end in 1945.