Since the 2000s, the state rescaling perspective has expanded its influence in critical urban studies. This perspective has made it possible to understand scalar reconfiguration of state power and its political-economic mechanism. This provides a new point of view on the nature of the modern capitalist city. While the notion of a city had been understood as a fixed, bounded, self-enclosed, static, or pre-given spatial unit in established human ecological urban sociology by the Chicago School researchers and the political-economic urban studies by the neo-Marxist social scientists, it has been grasped as being on a geographical scale, in the sense of being “global”, “regional”, “national”, or “local”, developed within the context of capital accumulation and state territoriality strategies in the rescaling perspective. In addition, this perspective clarifies the fact that urban governance is seen as critical for the rescaling processes and strategies of capital accumulation and state territorial strategies. By this approach, therefore, we can understand the political-economic process of territorial restructuring through urban governance under the impact of economic globalization and neoliberal restructuring of state apparatus. This article starts to examine the major theoretical arguments and empirical findings from the state rescaling perspective. In the next section, we analyze the political-economic process of territorial restructuring of the urban state, by using this perspective and analyzing a case of municipal merger in a Japanese middlesize industrial city. Through the case analysis, we consider some points for future research and debate state rescaling in Japan.