By the 2060s, robotics technology has advanced to the point that cybernetics have become plausible. World opinion begins to turn against robotics, leading to the U.N. declaring a unilateral ban on further research and development in 2067. Japan, being home to robotics pioneer Daiwa Heavy Industries, the governing body, strongly protests this ban, but is unable to prevent its passage.
In protest, Japan withdraws from international politics. All foreigners are deported, and further immigration is prohibited. In addition, the R.A.C.E. network is constructed a series of 270 off-shore installations that cover Japan with an energy field that distorts the entire electromagnetic spectrum, nullifying all communication between Japan and the outside world and making even satellite surveillance impossible. Trade and diplomacy continues, but for all intents and purposes, Japan vanishes from the world scene.
Ten years later, the American Navy technology Special Forces unit "SWORD" is lead on the intel of a Japanese informant of a trap set by Daiwa in Colorado. The instigator, Saito, escapes, cut off his own leg to get rid of Vexille Serra, a soldier of SWORD. Analysis of the leg show that it is made of bio-metal. SWORD then begin to suspect that Japan has used the R.A.C.E network to conceal extensive development of banned technologies. They thus embark on an unapproved scheme to infiltrate Japan and determine the distortion frequency of the R.A.C.E. network, enabling SWORD to gather intelligence on the country.
Although the agents successfully enter Japan, they are detected by security forces before they can transmit the distortion frequency. Vexille is the sole SWORD agent to evade capture or death, and only her lover Leon survives to be taken to Daiwa's headquarters.
Vexille awakens without her powered armor suit to find that Tokyo is now a shanty town ruled by Daiwa. A small resistance movement opposes the company, and uses Vexille's backup transmitter to successfully transmit the distortion frequency. Maria, the head of the resistance and former agent of Bureau Public Security, details the ten years of secrecy while SWORD studies the Japanese archipelago in shocked horror the islands are a wasteland devoid of life.
In 2067, an unknown disease struck the Japanese populace, and was countered by an experimental vaccine. In truth, the disease was created by Daiwa and the "vaccine" was merely an excuse for Daiwa to begin mass testing of experimental nanotechnology. Every Japanese citizen was thus converted into a form of synthetic life. And like any experimental technology, there were unforeseen side effects.
The conversion is imperfect, ultimately resulting in the infected humans entirely losing their free will and becoming merely lifelike machines. In addition, some of the nanotech went amok, resulting in the "Jags", giant whirling constructs of semisentient metal that prowl the wilderness like metallic sandworms. The Jags have destroyed all of Japan save Tokyo, which is protected by an inedible wall of ceramic.
The Resistance plans to draw the Jags along a service bridge to Daiwa's corporate headquarters, which now stands in the middle of Tokyo Bay. Despite a tense moment when she discovers that Maria was once Leon's lover, Vexille volunteers her assistance (and that of her flight-capable armor) in this effort. However, though Vexille and Maria succeed in drawing the Jags to the end of the service bridge, the bridge has been detached from the headquarters, the Jags fall into the sea, and Vexille and Maria are captured.
The two rebels are taken to Kisaragi, the master of Daiwa, who boasts that his research is nearly complete. And as he needs more test subjects than just Vexille and Leon, he is going to invade America to get them. Vexille attacks him with a hidden knife, revealing that his blood is still human he has not used the process himself due to its shortcomings. Saito, then strangles him.
At this point, the town council forces the ceramic gates open, destroying Tokyo and enabling the Jags to use the primary cargo bridge to enter Daiwa's headquarters. Kisaragi, having somehow survived, shoots Saito and escapes with his research. The underling then releases Vexille and Maria before succumbing to his wounds.
Vexille pursues Kisaragi while Maria frees Leon. The lover's reunion is a poignant one, as while he did not abandon her as she always assumed, he has moved on his concern for Vexille is evident. Thus when Vexille prevents Kisaragi's escape in a helicopter, Maria grapples him and smiles as her cybernetic body draws a Jag to devour them both. Vexille and Leon are rescued by a SWORD helicopter just as Daiwa headquarters collapses into the bay, along with every Jag in Japan.
As Vexille and Leon are flown from a now completely lifeless Japan, Vexille comments that humanity's spirit can never be taken away.