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Seven staff at the hotel in Hamamatsu city, southwest of Tokyo, had tested positive for the coronavirus, a city official said.
The joint flagbearer role for teams is a break with tradition after the International Olympic Committee changed the rules to send a message of gender parity.
Hubbard will compete in the super-heavyweight 87+kg category, her selection made possible by an update to qualifying requirements in May.
The decision, widely seen as being on the cards following statements by organisers and government medical advisers, highlights Japan's push to hold the multi-billion-dollar sports extravaganza.
The report, led by top health adviser Shigeru Omi, was released after Tokyo 2020's organising committee chief told the Sankei newspaper she wanted to allow up to 10,000 spectators at stadiums for the global sport extravaganza.
Prime Minister Yoshihide Suga called on the Japanese public to watch the Olympics on TV to avoid spreading the coronavirus.
It's the latest high-profile warning about the global sporting showpiece.
The comments by Japanese Olympics Committee board member Kaori Yamaguchi, a judo medallist, added to rancour around Japan.
The Indian contingent for the upcoming Tokyo Olympics is expected to be around 190, including over 100 athletes.
The government is currently preparing to extend a state of emergency across much of the nation originally set to be lifted on May 31, most likely well into June, officials have said.