The upper house of parliament passed the conspiracy bill early today after political wrangling through the night, overcoming the weak opposition's no-confidence motion against Prime Minister Shinzo Abe's cabinet and a censure motion aimed at Justice Minister Katsutoshi Kaneda.
The bill passed the more powerful lower house last month -- Abe's ruling coalition has a comfortable majority in both houses.
The new law allows investigators to charge an individual or organisation which conspires to engage in terrorism or other serious crimes.
US surveillance whistleblower Edward Snowden and Joseph Cannataci, UN special rapporteur on the right to privacy, have both criticised the law.
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It has also sparked regular street protests nationwide.
The government argues that the legislation is necessary to prevent terrorism ahead of the 2020 Olympic Games in Tokyo.
Officials also say it is a prerequisite for implementing a UN treaty against transnational organised crime which Japan signed in 2000.
The latest bill reduced the number of targeted crimes to some 270 offences and narrowed the definition of terrorist and criminal organisations.
Earlier versions of the law targeted more than 600 crimes unrelated to terrorism or crime syndicates.
Japan's bar association argued, however, that the current law still gives police and investigators too much leeway in deciding what constitutes a criminal organisation.
The general public could be targeted on conspiracy charges via monitoring phone and online conversations, it warned.