Eight Tokyo teachers were sacked and 168 were given official warnings last week for refusing to stand and sing the national anthem and show respect for the national flag during school graduation ceremonies.
The eight were on contracts, while the rest are full-time civil servants.
"They, too, could eventually lose their jobs if they receive repeated warnings," said Takeshi Okajima of the Tokyo Metropolitan Board of Education.
It is expected that the teachers will take legal action.
Last October, the board issued unprecedented directives which make it compulsory for state schools to display the national flag and for teachers and children to sing the national anthem during formal ceremonies.
In January, 228 teachers sued the board claiming that the directives are a violation of the civil liberties guaranteed by Japan's constitution. A court hearing on this issue began recently.
"We are afraid of losing freedom," said Mitsushi Kaneko, one of the plaintiffs. "That's why so many teachers defied the order last month knowing the consequences."
At the same time, parents who are angry at the authorities' undue interference have started a petition. One group has already collected more than 8,000 parents' signatures from 85 high schools.
"I'm not political but I can't remain silent any more," said Eriko Maruhama, who initiated the petition and last month attended her son's graduation.
The ceremony took place under the scrutiny of three inspectors from the board. Two teachers at the school defiantly remained seated as the national anthem played, and they now face punishment.
"What's happening is not democratic, but close to dictatorship," said Ms Maruhama. At another high school in Tokyo at which the majority of the pupils did not sing the anthem, teachers are bracing themselves for additional penalties for a "failure of proper supervision".
The board's latest policy has awakened fears of pre-war nationalism, especially among those who are of Korean and Chinese extraction and whose ancestors were forced to sing the national anthem under Japan's colonial rule.
"My daughter had never sung the anthem until last month - she did so only to protect her teacher," said Kou Bitin, whose mother is from Taiwan.
"The flag and anthem are not free of their association with Japan's military past."
In 1999, under the then prime minister Obuchi's government, new legislation gave official recognition to the Japanese national flag and the national anthem, although Mr Obuchi also stated that the law would not "pose new obligation on the people".
To date, no other regional educational board in the country has followed Tokyo's lead in implementing the measures.
The authorities in the capital are now planning to enforce the October directives during school entrance ceremonies later this month and at all other formal ceremonies in the future.
Takeo Takahashi, a representative of the Tokyo board, said: "We do not consider these measures excessive."