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The result will come as a relief to Prime Minister Fumio Kishida, who is pushing for the relocation of the Futenma U.S. military base to the city's Henoko coastal area.
The U.S. military population throughout Japan remains under a two-week order to stay on their bases or in their off-base homes until Monday.
Voters in Nago go to the polls Jan. 23 to choose a mayor in the first of a series of elections that could shape the prefecture's relationship with Tokyo.
Although the U.S. side has not given any reason for the cancellation, the coronavirus infection situation is believed to have been behind the decision.
The United States agrees to tighten COVID-19 restrictions on personnel at US military bases in Japan.