With the outbreak of the Sino-Japanese war on 7 July 1937, the peacetime budgetary limitations were removed and the more capable and expensive Mitsubishi Chi-Ha model was accepted as the new Type 97 medium tank by the army.

[2][3] However, the army chief staff did not give up on the idea of a lower-cost and lighter weight medium tank and thus this vehicle was developed.

The cannon was a short-barreled weapon with a relatively low muzzle velocity, but sufficient as the tank was intended primarily for infantry support.

[4] The shortcomings of the Type 97 Chi-Ha, with its low-velocity 57 mm gun, became clear during the 1939 Battles of Khalkhin Gol against the Soviet Union.

As a tank mounts a sled, it becomes tail heavy (center of weight shifts backwards) and that presented uncertainty when crossing wide trenches.

By becoming tail heavy, the rear portion of the suspension would undertake a greater load and thus wear out faster.

Mitsubishi and Jidosha Kogyo completed the first two prototypes in 1940 and the Kokura and Sagami Arsenals produced two more the following year.

The Imperial Japanese Army realized that further research and a better design were needed to counter the 1940s generation of Allied armor, such as the M4 Sherman.

[8] However, production of the Type 1 Chi-He did not begin until 1943, due to the higher priority of steel allocated to the Imperial Navy for warship construction.