Presiding Judge Hwang Han-sik agreed with Liu Qiang that Liu committed a "political crime" when he burned the front gates of the Yasukuni Shrine in December 2011, The New York Times reported.
The South Korean constitution forbids the extradition of anyone accused of a political crime.
Liu, 38, was released from a South Korean prison in November after serving 10 months for tossing four fire bombs at the Japanese Embassy in Seoul in January 2012.
No one was hurt in the attack and the embassy was not damaged.
Liu told police the attack was a response to Japan's refusal to apologize for enslaving Korean and other Asian woman as "comfort women" during World War II. Liu's maternal grandmother was among those forced into sexual slavery.
Some 200,000 women were forced to work in Japanese brothels while Korea was a colony of Japan from 1910 to 1945, historians estimate.