Tensions in San Francisco had increased, and since Japan`s decisive victory, Japan sanitized against Russia in 1905, demanding equal treatment from Japan. The result was a series of six notes communicated between Japan and the United States from late 1907 to early 1908. The immediate cause of the agreement was anti-Japanese nativism in California. In 1906, the San Francisco Board of Education passed a decree requiring children of Japanese descent to attend separate and separate schools. At that time, Japanese immigrants made up about 1% of California`s population, many of whom had immigrated in 1894 under a treaty guaranteeing free immigration from Japan.   Gentlemen`s agreements between industry and the U.S. government were common in the 1800s and early 1900s. The Bureau of Corporations, a predecessor of the Federal Trade Commission, was established in 1903 to investigate monopolistic practices. Restrictions on Japanese immigration were deemed necessary following an influx of Japanese workers into British Columbia and a wave of anti-Asian workers in the province. More than 8,000 Japanese immigrants arrived in Canada in the first ten months of 1907, a dramatic increase over previous years.  Reports that the Grand Trunk Pacific Railway planned to import thousands more Japanese workers to work on the western part of the railway fuelled the anti-Asian atmosphere.
 Hostility towards the Asian population turned violent at an Asian Exclusion League rally in Vancouver in 1907. The crowd turned into an uncontrollable mob that targeted the city`s Chinese and Japanese residents and destroyed their personal belongings. In 1908, Canadian Labour Minister Rodolphe Lemieux negotiated with Japanese Foreign Minister Tadasu Hayashi an agreement on limiting Japanese immigration to Canada. In accordance with the gentlemen`s agreement, the Japanese government has agreed to voluntarily limit the number of Japanese immigrants arriving in Canada each year. In some cases, these are gentlemen`s agreements in which Wall Street financiers, such as J.P. Morgan and his “House of Morgan,” would meet with the bureau to obtain prior authorization for mergers and acquisitions. One such example was the gentlemen`s agreement in which regulators and the president ignored the Sherman Antitrust Act, which allowed united States Steel Corp. to become the world`s first multi-billion-dollar company. In 1907, a stock market panic that hit several major investment banks caused a financial crisis. The panic led President Theodore Roosevelt to work closely with J.P. Morgan to consolidate the banks, arguing that this would avert a major crisis.
Despite their informal nature, the violation of a gentlemen`s agreement could have negative consequences on trade relations if a party decides not to keep its promise. A gentlemen`s agreement can also be described as a “gentleman`s agreement” and can be completed by a handshake or not. The increase in Japanese immigration, which was to replace some marginalized Chinese agricultural workers, has met with concerted opposition in California. To appease Californians and avoid an open break with Japan`s emerging world power, President Theodore Roosevelt negotiated the diplomatic agreement in which the Japanese government took on the responsibility of drastically limiting Japanese immigration, especially that of workers, so that Japanese children could continue to attend integrated schools on the West Coast.