Nepal-Japan relations have always been marked by mutual understanding, deepening friendship and expanding cooperation. In order to realize the full potentials of the bilateral relations, political dialogue should be launched for exploring the prospects of establishing strategic partnership between Nepal and Japan. As the country is being transformed from a monarchy to a federal democratic republic, Nepal also faces internal and external threat to national security. The internal threat comes from several terrorist and other armed groups active across the country in cohort with criminal gangs. External threat emanates from numerous criminal groups fuelling political and ethnic tensions and economic chaos. Nepal-Japan strategic partnership will enhance Nepal’s capacity to meet the new challenges while at the same time promoting state and democracy building.