After World War II ended, the Japanese government enacted a law known as Fueiho, or the Entertainment Business Control Law. The law regulated different entertainment activities, including dancing.
Specifically, the law states that clubs under 66 square meters cannot apply for a license to legally allow dancing. In places like Tokyo, where land is scarce and expensive, the law apparently applies to most clubs in town.
Although it was forbidden, most clubs did allow dancing. That was until 2012, when the police started cracking down on clubs who were breaking the law. As a result clubs like the Happy Cock (pictured on the right) have specifically banned dancing and will bounce anyone who attempts to.
If you want to read more on the background of this law and the development on it, check out the source.