The aim of this paper is to identify key challenges facing Japan's higher education since the early 1990s and their impacts on major research themes. In this paper key challenges include those resulting from the decline in the 18-year population, the cultivation of high-quality university graduates, the incorporation of national universities, the diversification of higher education systems, and globalization and internationalization of higher education. The paper concludes by arguing that challenges facing Japan's higher education and research are unquestionable and considerable. Because several challenges are different from that of any other countries, Japan has to find out solutions to tackle them by its own efforts. Furthermore, in response to these challenges, there has seen an evident transformation in a vast majority of higher education research institutes and centers from a purely academic-based research to more practical and operational research. Besides, at a policy level, numerous research themes and agenda have been developed and implemented by the Japanese government.