Most Japanese high schools require students to study a historical art: Of the martial arts, the choice is usually Kendo or Judo/Jujitsu. Schools have implemented other arts, such as Aikido and Karate, but the latter is Okinawan (technically Japan, but not to most Okinawans) and the former is fairly new (officially called Aikido in 1942). Therefore, Kendo and Judo are the most popular academic offerings, and of them Judo is frequently chosen because it's (1) cheaper (less equipment), and (2) more practical for self-defense (you don't need a sword). I should clarify that Judo is still fairly new (1882), but it's firmly rooted in ancient Jujitsu arts, while considered safer to practice. The headquarters for Judo, the "Kodokan", receives over a million visitors a year.

Given all that, I would have to say Judo is the most popular art in Japan. Now if you go to Okinawa, then Karate is considerably more popular.

Currently, Karate is the most popular martial arts in Japan. Some even claimed that it's also the most popular martial arts in the world. This is mainly influenced by western action movies from 1950s to 1970s that's very often contains Karate acts when their main characters start to fight without weapon.