The announcement comes after Japan failed earlier this year to convince the IWC to allow it to resume commercial whaling.
Top government spokesman Yoshihide Suga said the commercial hunts would be limited to Japan's territorial waters.
"We will not hunt in the Antarctic waters or in the southern hemisphere," he added.
Tokyo has repeatedly threatened to pull out of the IWC, and has been regularly criticised for catching hundreds of whales a year for "scientific research" despite being a signatory to a moratorium on hunting the animals.
Suga said Japan would officially inform the IWC of its decision by the end of the year, which will mean the withdrawal comes into effect by June 30.