I've lived in Wakayama, and even taught in the public school system there, but only as a temporary english teacher. Wakayama prefecture has so few foreigners to begin with that this rule can't be affecting more than a handful of people.

This rule probably got written a hundred years ago and forgotten about because it wasn't really impacting anyone. Japan still has a lot of work to do on cleaning up racism, but It's nice to see small progress steps like this happening.