After China lost the Sino-Japanese War in 1894, Taiwan was ceded to the Japanese, beginning a half-century of Japanese colonial rule of the island. The people on Taiwan were treated as second-class citizens by their colonial rulers and this time was one of hardship and suffering. Numerous revolutions were instigated by patriots, and though unsuccessful and thousands died, they amply testified to the heroic spirit of the people on Taiwan. With China's victory in the War of Resistance Against Japan and the consequent signing of the Instrument of Surrender on August 15, 1945, freedom was once again restored in Taiwan. Since Japanese rule of Taiwan officially ended on October 25, 1945, the day has been designated as Taiwan's Retrocession Day in memory of this event.

When the people in Taiwan heard of this news the nation erupted with euphoria and celebration.

After retrocession, Taiwan's economy grew with unprecedented speed and the people's standard of living, compared with that during the colonial period, changed enormously for the better. This remarkable transformation testifies to the benefit Taiwan enjoyed by casting off Japanese rule.

To remind the people of the days when Taiwan was subjected to foreign rule and to cherish the present accomplishments of the nation, popular memorial activities are held and families hang the national flag every year on October 25 to celebrate the important significance of this day.

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