At the same time, Japanese Empire troops were being largely defeated in the Pacific Front and in a last-minute attempt of trying to draw support, Japan dissolved French control over its Indochinese colonies in March 1945.

King Sisavang Vong was also imprisoned and was forced by the Japanese, and with the urging of Prime Minister Prince Phetsarath, into declaring his Kingdom of Luang Phrabang within the French Protectorate of Laos as an independent state while accepting it into the Greater East Asia Co-Prosperity Sphere on 8 April 1945.

At the same time, remaining French officials and civilians withdrew to the mountains to regroup and join a growing Laotian insurgency against the Japanese, who occupied Vientiane in March 1945.

[2][3] After Japan's surrender in August, King Sisavang Vong agreed with the French that he intended to have Laos resume its former status as a French colony against the urging of Prince Phetsarath, who sent a telegram to all Laotian provincial governors notifying them that the Japanese surrender did not affect Laos' status as independent and warning them to resist any foreign intervention.

Phetsarath also proclaimed unification with the country and the southern Lao provinces of Indochina on 15 September, this led to the King dismissing him from his post as Prime Minister on 10 October.

"As for the population, it was mostly silent, used to the established order and did not appear hardly concerned by this aspiration for the country's independence, and personally I think that it was mostly loyal to the ancienne administration, that is to say, the French."

In an attempt to reign in fiscal expenditure and inflation, the Minister of Finance, Katay Don Sasorith, issued new money in early 1946, which quickly became known as 'Katay's dried banana leaves' for the poor quality of the paper on which it was printed and its uselessness.

Souphanouvong had made clear his refusal to accept the new political set-up in Vientiane, and was ready to embrace an alliance with the Viet Minh against the French.