It is the latest blow to efforts worldwide to promote driverless vehicles, a technology with particular potential benefits in ageing Japan.
The driverless bus-like vehicle, similar to an electric golf cart, started operations in Eiheiji in Fukui prefecture in central Japan in May.
This was after Japan last year allowed Level 4 self-driving vehicles on public roads, meaning that they can operate only within a limited area.
On Sunday it hit a bicycle that was parked on a roadside, said local official Norifumi Hiramoto.
None of the four passengers was injured and the vehicle developers are investigating the cause, he said.
"We are suspending the operation until the cause of the incident becomes clear," he said.
A Fukui police spokesman confirmed the accident caused no injuries.
The vehicle, designed to avoid obstacles with sensors and radars, has been driving at a maximum speed of 12 kilometres (7.5 miles) per hour.
The suspension comes just days after California authorities suspended testing of driverless cars as robotaxis by General Motors's Cruise subsidiary following a series of accidents and other problems.
Like other industrial countries, Japan has been exploring the possibility of allowing self-driving technologies on public roads.
Japan, which is considering easing a ban on ride-hailing services to alleviate a shortage of taxi drivers, aims to allow Level 4 vehicles in 50 locations within three years.
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