The idea of Japanese cultural superiority over other Asian races had been expounded as early as the late nineteenth century and steadily grew in intensity until the end of World War II. For example, the famous Japanese educator Fukuzawa Yukichi wrote "Japan's Mission in Asia" in 1882 to support the idea of Japanese imperialism and the "manifest destiny" of Japan to be the leader of Asia. In the early part of the twentieth century, several ultranationalist groups and writers, such as the Black Dragon Society and Kita Ikki, gained increasing popularity with their views that Japan should take leadership in Asia to expel foreign powers by means of a righteous war if necessary. Many of these ultranationalist groups believed that the moral purity of the Yamato race and Japan's unique ancestry as descendants of the sun goddess Amaterasu entitled the Japanese to such a leadership role in Asia. In 1905, Japan became the first Asian country to defeat a Western power, namely Russia in the Russo-Japanese War of 1904-5, which bolstered Japan's confidence in its destiny to lead Asia.

Economic reasons played a large role in Japan's announcement of the Co-Prosperity Sphere in 1940. Japan required East Asian raw materials such as oil from the Dutch East Indies and rubber from Indochina in order to keep its manufacturing industry and military in China supplied. The U.S. embargo of oil and steel shipments to Japan and other restrictions on raw materials shipments by Western nations pushed the Japanese leaders to seek sources in Asian countries to ensure Japanese self-sufficiency. The other Asian countries in the Co-Prosperity Sphere also would provide Japan with export markets for its manufactured goods and with land for its surplus population.

In addition to cultural and economic factors, Japan's international political aspirations also led to the formation of the Co-Prosperity Sphere. Since the late nineteenth century, Japanese leaders believed they had just as much right as Western powers to acquire and maintain colonies in Asia. Japan considered colonies to be a basic prerequisite to achieving international prestige and becoming a first-rate country (ittô koku). The Western imperialist countries also subjected Japan to a series of coercive acts, insults, and provocations, which caused great anger to fester among the Japanese people. For example, the 1921-22 Washington Conference naval treaties forced on Japan an unfavorable battleship ratio of 5:5:3 for the US, Britain, and Japan respectively. In 1919 at the Paris Peace Conference, Western countries rejected the simple Japanese request to have a racial equality clause included in the League of Nations Covenant. In 1924, America passed the Japanese Exclusion Act to shut off Japanese immigration into the US. This series of international affronts to Japanese pride and status provided fuel to Japanese militaristic sentiments and eventually led to Japan attacking the Western powers to establish the Greater East Asia Co-Prosperity Sphere.

Japanese leaders used the Co-Prosperity Sphere in its propaganda for the people both in Japan and in other Asian countries. The leaders spoke of "Asia for Asians," the need to liberate Asian countries from Western imperialist powers, and economic co-prosperity for member nations of the autarkic bloc. As Japan occupied various Asian countries, they set up governments with local leaders who proclaimed independence from the Western powers.

The occupied countries soon found out that the reality of the Co-Prosperity Sphere differed greatly from the high-sounding propaganda. The local governments established by the Japanese turned out to be puppet regimes with the Japanese making all significant decisions. The Japanese conducted themselves with great haughtiness and disdain to the local population and imposed a program of "Japanization" on the people with little or no regard for local customs and beliefs. Many native people of these Asians countries suffered and died from forced labor, torture, and execution. The Co-Prosperity Sphere turned out to be just another form of oppressive imperialism in place of the imperialism previously imposed by Western nations.