Anti-Japanese sentiment flared again after World War I. Several groups hoped to remove the Japanese from the industry. A plan was introduced to strip the Japanese of their fishing licenses. In 1919, Japanese fishermen held almost 50% of the licenses in the Province. By 1941, Japanese fishermen held only 12% of the licenses in the Province. At the same time, Japanese immigration was further restricted. In 1923 only 150 Japanese men could arrive each year to Canada. By 1928 only a total of 150 Japanese, including women and children, were allowed to immigrate each year. Racism was forcing Steveston's Japanese community to become very closed off from the rest of the community.
The Japanese Community in Steveston was forever changed during World War II. Canada declared war on Japan late in 1941. The Canadian Government quickly issued orders to remove all persons of Japanese descent from the B.C. coast. The Government declared them to be enemy aliens. Over 2,500 Japanese residents were forced to leave Steveston. By May of 1942, the town had lost two-thirds of its residents and businesses. Steveston's canneries lost most of their fishermen and workers. The Japanese were sent to internment camps in remote locations in the BC Interior such as New Denver and Christina Lake or on prairie farms in Alberta and Manitoba. They lost their businesses, homes, boats and possessions. No person of Japanese ancestry was permitted within 100 miles of the B.C. coast until 1949, four years after the end of the war.