The legislation is aimed at plugging Japan's notoriously leaky bureaucracy after years of complaints from chief ally the United States, which has been reluctant to pool information.
It comes amid a worldwide debate over government secrecy in the wake of the Edward Snowden affair, which yesterday saw the US ambassador to Germany summoned after claims Washington was spying on Chancellor Angela Merkel.
New laws are "a pressing issue because sharing intelligence with other countries is only possible on the premise that secrets will be kept," chief government spokesman Yoshihide Suga told a press conference.
Information related to defence, diplomacy, counter-intelligence and counter-terrorism will all be classified as a state secret, the bill says.
Legislation will be submitted to the parliament later today, Suga said, adding the government wanted the new confidentiality law to be passed by lawmakers "as soon as possible".
Suga said the change was important "for the effective functioning" of a Japanese version of the US National Security Council that Prime Minister Shinzo Abe has said he wants to establish to integrate information linked to diplomacy and security.
The Japan Federation of Bar Associations (JFBA), which has led a campaign against the bill, said it was "deplorable" it had been approved by ministers "without sufficient safeguards on the public's rights to know".
Amongst other complaints, the JFBA has demanded a clear definition of "state secrets", with a list that is open to inspection by legislators, but the bill "does not fundamentally address these problems" JFBA's president Kenji Yamagishi said.
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