In 1939, Japan's Ministry of Education established the Subsidiary Fund for Scientific Research, a predecessor to the Grant-in-Aid for Scientific Research (KAKENHI), which supported basic scientific research in Japan. The budget of this Fund was twice the sum of the existing research grants. Even though the Second Sino-Japanese War was in progress, the Ministry of Education emphasized the need for basic scientific research. Previous studies site impact of scientific blockade against Japan or then Minister's influence as main reason for Establishment of the Subsidiary Fund for Scientific Research. However, the ban was not serious in 1939; in fact, from 1936 to 1940, foreign books and magazines were available in Japan. The Ministry of Education had started searching for new ways to promote science and its study well before the change in government. Therefore, the information from previous studies is inadequate. In this paper, the author focuses on the "unsustainable development of applied research" during the Second Sino-Japanese War. When the war started, the scientific community started providing applied research in response to wartime demands. Scientists started working towards allaying the shortage in natural resources and military material that had been brought about by the economic block against Japan. It became obvious then that a lack of talented scientists, scientific facilities, and research funds were hindering the progress of applied research. Scientists started asking the Ministry of Education to swiftly employ measures to promote science. This resulted in the Ministry establishing the Subsidiary Fund for Scientific Research. In prewar Japan, the environment for academic research was very poor; due to this, a single-minded focus on applied research was unsustainable.