In addition to the British, there were three conflicting forces in Indonesia. The Indonesians, under the nationalist leader Sukarno, had declared independence on August 17, and were determined to resist the return of their former masters. The Dutch were equally determined to reoccupy their wealthiest colony, but civilians and the local garrison had just been released from nearly four years in captivity and it would take many months to train and ship fresh troops from the Netherlands. Finally, there was a large Japanese army, whose task under the ceasefire terms was to maintain law and order until the British could take over. However, many of its senior officers were complicit in encouraging and arming the Indonesian resistance.

The objective to which the British devoted all available resources was RAPWI — the recovery of Allied prisoners of war and civilian internees. This was a mammoth task, for PoW camps were spread across all Japanese occupied territories.

The situation, especially in Java, was murky. Colonial rule was unpopular, the Dutch having been often brutal masters. Nationalist feeling had been growing throughout the 20th century, giving rise in particular to a militant youth (Pemuda) movement. It was Japanese policy to encourage the natives of the lands they conquered to turn away from their former masters, so long as they remained firmly under Tokyo's thumb.

In late 1942, Queen Wilhelmina had broadcast from exile an offer to form a sort of Dutch Commonwealth, which would allow self-government to Indonesia and other colonies after the war.

As the war turned against them, the Japanese increased their support for the nationalists and in particular Sukarno, who had collaborated in sending several hundred thousand of his compatriots to Japanese labour camps. The Japanese army had begun to give military training to Pemuda groups in 1944. After the capitulation, some local commanders transferred weapons and ammunitions to the militias, strictly against the terms of the surrender.

Nationalist feeling was strong across Java, but the Pemuda were most heavily armed in the east around Surabaya. As August moved into September, Sukarno and the new nationalist authorities took nominal control of the chief cities, including Batavia (as Jakarta was known under Dutch rule), Bandung, Semarang and Jogjakarta. However, their control of the Pemuda was tenuous.

During the same period, Allied PoWs and Dutch civilians liberated themselves, though many remained in or around the camps in which they had been held. Among them was Lieutenant — Colonel Laurens van der Post (despite his name a British soldier), who began his own survey of the situation. Dutch officials tried at local level to re-establish their control, but were prevented by the Indonesian authorities, which had managed to restore some services. Worse, many Dutch, Eurasian and Chinese civilians were attacked by Indonesian militants. The Japanese mostly did their best to protect the former captives, but not always successfully.