The ruling coalition forced a vote on the bill in an upper house committee yesterday. Despite stalling tactics by opposition parties, the full upper house approved the bill today by 130 to 82.
The more powerful lower house had approved the bill last week.
Prime Minister Shinzo Abe, who is seeking to increase Japan's global security role and create a more authoritarian government at home, says the law is needed to protect national security and assuage US concerns over the risks of sharing strategically sensitive information with Tokyo.
The bill allows heads of ministries and agencies to classify 23 vaguely worded types of information related to defense, diplomacy, counterintelligence and counterterrorism, almost indefinitely.
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"I think there needs to be more explanation," party member Takashi Uto said during the committee debate. "Naturally people are concerned because they don't know what will be a secret."
Foreign businesses engaged in defense contracting, or even companies dealing in "dual-use" technologies and products that have military applications could be affected, said Lawrence Repeta, a law professor at Meiji University in Tokyo.
"If you're in contact with the government, you're at risk of crossing a line even if you don't know there's a line there," Repeta said. "You could be in the position of trying to sell a product that might involve designated secrets. It's something companies have to think about. It's an entirely new area.