This chapter covers the Japanese occupation, the Indonesian struggle for independence, and the immediate post-colonial economic crisis. Japanese wartime policies focused on resource extraction and militarization, leading to hyperinflation, famine, and infrastructure decay. After independence in 1945, the new Republic faced fiscal collapse, territorial fragmentation, and a colonial war with the Netherlands. The chapter argues that this period, though chaotic, was crucial in breaking colonial economic structures and legitimizing the nationalist state. It sets the context for the post-independence challenge of balancing economic recovery with sovereignty, unity, and institutional formation.