The landmark ruling acknowledged for the first time the explicit insults used in the rallies constituted racial discrimination, human rights experts said, and it could prompt a move to exempt hate speech from Japan's constitutional right to free speech.
In the Kyoto District Court ruling, judge Hitoshi Hashizume said hateful language the members of the anti-Korea group Zaitokukai and their supporters shouted and printed on banners during the rallies around the school were illegal and disturbed classes and scared off school children. The judge said the video footage of the racist rallies posted by the group on the web was illegal.
The court said the rallies "constitute racial discrimination" defined under the United Nations' convention on the elimination of racial discrimination, which Japan has ratified.
Monday's ruling also banned the group from staging further demonstrations in the neighbourhood of the pro-Pyongyang Korean elementary school in southern Kyoto, according to a court spokesman Naoki Yokota.
Several hundred thousand Koreans comprise Japan's largest ethnic minority group, many of them descendants of forced labourers shipped to Japan during its 1910-1945 colonial rule of Korea, and still face discrimination.
Such rallies have escalated this year and spread to Tokyo and other cities with Korean communities amid growing anti-Korean sentiment. In street rallies held in major Korean communities in the Tokyo area, hundreds of group members and supporters called Koreans "cockroaches," shouted "Kill Koreans" and threatened to "throw them into the sea."
Zaitokukai, which boats more than 10,000 members, said they were only protesting the school's use of a nearby city-run park without permission. They also say that they protest against the "privileges" given to ethnic Koreans in Japan and that slurs against them are part of "freedom of expression."
The school filed the lawsuit in June 2010 against the group and eight activists over the hate-speech rallies held on three occasions between December 2009 and March 2010 near the ethnic Korean elementary school. The activists threatened Koreans and called them in names, causing some children to develop stomach pains.
An earlier ruling related to the demonstrations found four of the eight activists guilty of obstruction of business and vandalism, but did not discuss the racist content.