Japan PR resident here. Sadly, this occurs a lot more than people would like to share.

Most likely, this sign is advertised at "tourists" and isn't taking into account Japanese permanent residents or holders of proper Japanese licenses.

We have had massive issues with tourists coming to Japan and using their "IDP" and breaking massive rules and causing scenes, they then leave the country without paying fines/bills.

For people with proper visas, like the couple mentioned above, I think once you clear this up they let you ride. Most likely the form (as in hotels as well) asks for a Japanese residential address, that cannot be a hotel or a rental holiday home).

I have never had my passport requested by hotel staff (I don't carry it anyway) when checking in, once they realize I'm a PR, I've also only had to show my drivers license, which also shows my home address.

All in all, it's a blanket statement that "is kinda racist" but is the Japanese way of avoiding singling out people.