Japan is a jus sanguinis state, which means nationality is deferred by blood, not by location of birth. If a baby is born in Japan and either of its parents is a Japanese national, then the baby will have Japanese citizenship. If a child is born to Chinese parents living in Japan, it won’t automatically be granted citizenship.
Japanese citizenship requirements
To become a Japanese citizen you must have lived in the country for at least five years and be over twenty years of age. Your mental health must be good and be of good character. Having a criminal record could be detrimental to your application, but each case is examined individually and the seriousness of the crime and when it was committed are taken into account. As always, officials will want to see proof that you can support yourself and your family.
In addition to these basic requirements, there is an enormous amount of required documentation. This includes everything from your birth certificate to the names of your family written in katakana, one of the Japanese writing systems.
Some applicants will have their home, and possibly their workplace, inspected by officials. This process is essentially done to check the details provided in your application are correct. Most applicants aren't subject to such an inspection and the likelihood of getting one depends on various factors, for example, how easy it is to verify your home and workplace address online. The chances of an inspection also depend on the workload of the naturalization office - obviously Tokyo and Osaka tend to be busier, and therefore less likely to be able to inspect every applicant's home than more rural offices.
The application process can be lengthy. The Ministry of Justice says the whole process takes from six months to a year. Citizens who have successfully completed the naturalization process report varying time frames, often it depends on how quickly you can gather all the necessary paperwork together.
The good news is, while it may take awhile to process your application, about 99% of all applications are approved. Reported in the Japan Times: "In 2010, 13,072 citizenship applications were approved with just 234 rejected".
Remember you should make sure to check with the Ministry of Justice for updated citizenship requirements and ask as many questions as necessary when dealing with officials.