Some of Japan's literary monuments were written during the Nara period, including the Kojiki and Nihongi, the first national histories compiled in 712 and 720, respectively; the Man'yoshu (Collection of Ten Thousand Leaves), an anthology of poems; and the Kaifuso (Fond Recollections of Poetry), an anthology written in Chinese by Japanese emperors and princes. Another major cultural development of the era was the permanent establishment of Buddhism in Japan. Buddhism had been introduced in the sixth century but had a mixed reception until the Nara period, when it was heartily embraced by Emperor Shomu. Shomu and his Fujiwara consort were fervent Buddhists and actively promoted the spread of Buddhism, making it the "guardian of the state" and strengthening Japanese institutions through still further Chinese acculturation. During Shomu's reign, the Todaiji (Great East Temple) was built, and within it was placed the Buddha Dainichi (Great Sun Buddha), a sixteen-meter-high, gilt-bronze statue. This Buddha was identified with the Sun Goddess, and from this point on, a gradual syncretism of Buddhism and Shinto ensued. Shomu declared himself the "Servant of the Three Treasures" of Buddhism: the Buddha, the law or teachings of Buddhism, and the Buddhist community.

Although these efforts stopped short of making Buddhism the state religion, Nara Buddhism heightened the status of the imperial family. Buddhist influence at court increased under the two reigns of Shomu's daughter. As Empress Koken (r. 749-58) she brought many Buddhist priests into court. Koken abdicated in 758 on the advice of her cousin, Fujiwara Nakamaro. When the retired empress came to favor a Buddhist faith healer named Dokyo, Nakamaro rose up in arms in 764 but was quickly crushed. Koken charged the ruling emperor with colluding with Nakamaro and had him deposed. Koken reascended the throne as Empress Shotoku (r. 764-770). The empress commissioned the printing of 1 million prayer charms--the Hyakumanto dharani--many examples of which survive. The small scrolls, dating from 770, are among the earliest printed works in the world. Shotoku had the charms printed to placate the Buddhist clergy. She may even have wanted to make Dokyo emperor, but she died before she could act. Her actions shocked Nara society and led to the exclusion of women from imperial succession and the removal of Buddhist priests from positions of political authority.

Despite such machinations, Buddhism began to spread throughout Japan during the ensuing Heian period (794-1185), primarily through two major esoteric sects, Tendai (Heavenly Terrace) and Shingon (True Word). Tendai originated in China and is based on the Lotus Sutra, one of the most important sutras of Mahayana Buddhism. Shingon is an indigenous sect with close affiliations to original Indian, Tibetan, and Chinese Buddhist thought founded by Kukai (also called Kobo Daishi). Kukai greatly impressed the emperors who succeeded Emperor Kammu (782-806), and also generations of Japanese, not only with his holiness but also with his poetry, calligraphy, painting, and sculpture. Kammu himself was a notable patron of the otherworldly Tendai sect, which rose to great power over the ensuing centuries. A close relationship developed between the Tendai monastery complex on Mount Hiei and the imperial court in its new capital at the foot of the mountain. As a result, Tendai emphasized great reverence for the emperor and the nation.

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