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The existing scholarship has typically explained the emergence of modern Japan as a territorial sovereign in the late-nineteenth century to be a result of its response to Western imperialism, which paved the way for it to build its own empire. Scholars have found Japan’s motivation for drawing territorial boundaries either in the pursuit of the maintenance of independence or its entry into the international society. However their narratives do not fully explain why the process led to the establishment of Japan’s sovereignty over border zones with ambiguous territorial status, such as the Kuril Islands and the Ryukyu Kingdom. Approaching the question by investigating local developments, this thesis presents a twofold explanation for the emergence of territorial boundaries around Japan: that the rise of sovereignty had origins in the long-term decline of the border zones’ political institutions; and that Japan’s expansion into these zones was enabled by a diplomatic equilibrium (which the thesis calls the balance of favour) among the Western powers. The rise of trans-Pacific commercial activities, the decline of tributary trade in East Asia, and Russia’s strategic shift to the Far East prompted fundamental changes in the political landscape for the border zones. The Western imperialists in the 1860s and the 1870s saw it as best that Japan control these areas, because one imperial power’s territorial gain would have unleashed a scramble that none of them saw as worth fighting. The above argument provides an alternative to the conventional Japan-centred narratives of interactions between Western imperialism and the East Asians. It also adds to the historical study of the border zones by providing a comparative analysis and connecting them with a broader context. It thus bridges the historiographical gap between the diplomatic history of bakumatsu and Meiji Japan and the local histories around the archipelago.