They're not idiots by a long shot. But Japan is particularly racist. Living on an island and isolating yourself from the world for over a century will do that...
The article you posted directly contradicts the claim "there are no laws that ban discrimination in Japan" though it supports the prevalence of racism.
FYI: there are no laws that ban discrimination in Japan, for instance in the housing market. Source: https://en.wikipedia.org/wiki/Ethnic_issues_in_Japan