This paper points out four common misunderstandings of the economic history of Japanese colonial Taiwan. They are: (1) Taiwan's economic development initiated from the Japanese colonial period; (2) the historical origin for Taiwan's economic development prior to the Japanese occupation was unique for Taiwan as compared with mainland Chian; (3) The economic development of Japanese colonial Taiwan has been fulley monopolized by Japanese government and Japanese merchants; (4) There remains few heritage from the colonial rule to postwar Taiwan. To halt these misunderstandings, this paper point out: There remains deep historical legacy from pre-colonial Taiwan to colonial Taiwan; such historical legacy can be traced back to mainland China's development for several thousand years; such legacy was reinforced by Japanese colonial policy which emphasized the grass-root development of agriculture and commerce. It left postwar Taiwan a much more abundant heritage than mainland China in the same period which had been seriously ravaged by war.