The current state of emergency in Tokyo began in late April and greatly limits the opening hours of bars and restaurants and prohibits them from selling alcohol.
That measure will now end in the capital and eight other regions on June 20, Prime Minister Yoshihide Suga announced. It will remain in place in Okinawa.
“The number of infections across the country has been declining since mid-May and the situation in terms of hospital beds is constantly improving,” he said.
“On the other hand, in some regions, there are signs that the decline in the number of infections is slowing down,” Suga added.
In lieu of the emergency, the government will implement so-called “near-emergency” measures in Tokyo and six other areas until July 11.
The measures will slightly relax the rules on alcohol, allowing sales until 7:00 pm, but still ask restaurants and bars to close at 8:00 pm.
Crucially, with only five weeks to open the Games postponed by the pandemic, Tokyo is likely to maintain strict limits on the number of spectators allowed at major events.
The current state of emergency allows only 5,000 people or 50 percent of the capacity of the place, whichever is smaller.
And on Wednesday, the government approved a maximum limit of 10,000 spectators for areas that are not under any restrictions.
Those rules are likely to guide Olympic organizers as they decide in the coming days how many, if any, national fans will be allowed to attend.
Foreign fans have already been excluded from the games for the first time, and organizers said they would wait to rule on domestic spectators until the emergency was lifted.
The issue is controversial. While cases in Japan have fallen since their fourth peak, some medical professionals fear crowds of Olympic spectators could stoke a further surge.
A report expected soon from some of the government’s top medical advisers will argue that holding the games without fans would be the safest thing to do, national broadcaster NHK said on Thursday.
Experts will urge additional rules to be imposed if spectators are allowed, NHK said.
Japan has seen a comparatively small virus outbreak, with just over 14,000 deaths despite avoiding severe lockdowns.
But just over six percent of the population is fully vaccinated so far.
Given the likely restrictions, Olympic organizers have given up on selling more tickets and are weighing a lottery system to determine which ticket holders will be able to attend the events, the Kyodo news agency reported.
Millions of tickets were sold in Japan before the postponement last year, and although several hundred thousand refund requests were processed after the Games postponement, the number of ticket holders is likely to exceed the spectator limits in many events.
With just over a month to go until the Games begin, organizers are trying to build confidence that the biggest international event since the pandemic began will be safe for participants and the public.
Recently updated virus rule books released this week warn athletes that they could be kicked out of games if they violate requirements such as wearing masks and daily testing.
Organizers say more than 80 percent of the athletes will be vaccinated and banned from interacting with the Japanese public.
Recent polls have suggested a slight shift in public opposition to holding the Games, and now there is more in favor of them taking place than canceling them.
Previous polls that offered postponement as an option tended to show that the majority of Japanese people preferred another delay or cancellation.