The development of the formal security strategy is part of Prime Minister Shinzo Abe's push to boost Japan's defence and its international role. It reflects global power shifts, notably changes in the relative influence of Japan's longtime protector, the United States.
"As the security environment surrounding our country gets increasingly severe, we have been working to rebuild our national security policy with a firm commitment to defend the people's lives and possessions," Abe said Wednesday at a meeting where a panel of experts and lawmakers discussed their draft.
The national security strategy is modeled in part on similar documents in the United States and elsewhere. The Cabinet is expected to approve the strategy next week, along with a revision of Japan's long-term defence program guidelines.
Much of the strategy is contentious, as many Japanese remain wary of moves away from the pacifist constitution adopted after World War II. One early sign of opposition was a drop in Abe's popularity ratings last weekend after his government forced through legislation to strengthen the protection of government secrets.
South Korea is also uncomfortable with any Japanese military expansion because it was colonized by Japan, and China is likely to protest.
"Japan's accusations and hyping of the China threat have an ulterior motive," Chinese Foreign Ministry spokesman Hong Lei said Wednesday. "We urge Japan to follow the historical trend, walk on the path of peaceful development and make due efforts to improve ties."
The draft security strategy says changes in America's relative influence make it necessary for Japan to expand its alliances with other countries. It raises concern about China's rapid military expansion, as well as North Korea's nuclear and missile capabilities.
It says Japan can contribute to peace and international stability by strengthening its diplomatic and defence capabilities. It describes Japan's alliance with the U.S. as an "indispensable" deterrent, but says it should be supplemented by Tokyo's own efforts to step up missile defences and other capabilities.
To defend territorial claims in areas disputed with China, the government should step up maritime defence, the report says, citing recent Chinese entries into airspace and waters around contested islands in the East China Sea.
The report also says Japan should relax bans on arms exports as a way to step up its international peacekeeping co-operation.
Shinichi Kitaoka, president of the International University of Japan and head of the panel, said members stressed the need to allow the export of "Japan's superb defence equipment," a move that would please domestic industry but faces opposition from those who favour a more pacifist Japan.
The panel also endorsed the draft revision of Japan's defence guidelines, which set priorities for the next decade and are also expected to be approved by the Cabinet next week.
The draft proposes expanding joint military exercises with the U.S. and surveillance activities to deal with the region's growing territorial disputes. It also urges Japan to strengthen defence ties with South Korea in three-way co-operation with the U.S., and expand ties with European defence networks.
Associated Press news assistant Zhao Liang in Beijing contributed to this report.