Two passengers who were onboard the quarantined Diamond Princess cruise liner have died after being diagnosed with Covid-19, Japan’s health ministry said on Thursday.

The victims – the first people connected to the ship to have died – were an 87-year-old man and an 84-year-old woman, both of whom had pre-existing medical conditions, the public broadcaster NHK said, adding that the man had been hospitalised on 11 February and the woman the following day.

On Thursday, China reported a steep drop in infections in Hubei province, after changing how it classifies confirmed cases. Hubei, the centre of the outbreak, reported 349 new infections, compared to 1,693 the day before, and the lowest increase since 25 January. There were 394 confirmed new infections across the country, marking the largest drop in almost a month.

Across China, authorities reported 114 new deaths as of the end of Wednesday, bringing the total number of officially reported deaths in the country to 2,118.

In South Korea, the city of Daegu was placed on high alert after the number of infections centred around the congregation of a “cult” church soared to 38.

It is believed that a 61-year-old woman who worships at the controversial Shincheonji Church of Jesus has infected 37 others, a cluster that now accounts for almost half of the country’s 82 cases.

Daegu’s mayor said the city was facing an “unprecedented crisis” and ordered the closure of public libraries and kindergartens, while soldiers at Korean and US military bases in the area were confined to barracks.

News of the Diamond Princess deaths came as Japanese officials defended the decision to keep all 3,700 passengers and crew on the ship for more than two weeks in an attempt to contain the outbreak.

More than 620 passengers on the Diamond Princess have tested positive since the ship went into lockdown in Yokohama on 5 February, two days after it was confirmed that a passenger who had disembarked in Hong Kong late last month had tested positive.

But the day before they were confined to their cabins, ship events continued, including dances, quizzes and an exercise class, even as passengers were undergoing health checks.

The US Centers for Disease Control and Prevention said Japan’s efforts “may not have been sufficient to prevent transmission among individuals on the ship.”

In response, the National Institute of Infectious Diseases in Tokyo released an analysis it said shows that a large portion of infections occurred before the quarantine began, and that secondary transmissions – those that occurred in the past 14 days – were confined mainly to crew members, government officials and health workers not subject to the same restrictions as the passengers.

Most of the infected passengers developed symptoms between 6to 9 February, the institute said, while most crew members first showed symptoms from 10 February onwards.

While passengers were confined to their cabins, apart from brief, restricted periods on deck, members of the ship’s staff continued to prepare meals and perform other work duties, thereby allowing the virus to spread to colleagues and passengers.

“The virus was most likely spread not through coughs and sneezes, but from the food trays an infected crew member carried to the passengers,” Shigeru Sakurai, an Iwate Medical University professor, who inspected the situation onboard last week, told the Kyodo news agency.

Conditions on the ship prompted Kentaro Iwata, a specialist in infectious diseases at Kobe University hospital, to condemn disease control measures as “chaotic” and “completely inadequate” in a YouTube video that attracted more than 1 million views.

On Thursday, Iwata told reporters he had removed the video after his concerns were addressed by health officials onboard the Diamond Princess, including a strict separation between “clean” and “dirty” areas of the vessel.

But he defended his criticisms, and repeated his concern that passengers leaving the ship this week should be placed in “soft quarantine” in case they start to develop symptoms, even though they have tested negative.

“The risk is reduced, but there is still a risk,” he told reporters. “People leaving [the ship] should be monitored for at least 14 days and placed in soft isolation, for example, in case they show symptoms.

An ambulance can be seen at Daikoku Pier in Yokohama Japan where the Diamond Prince Cruise Ship stopped Photograph: Ramiro Agustin Vargas Tabares/ZUMA Wire/REX/Shutterstock

“I haven’t changed my view in terms of the risk of secondary infection onboard. They kept 3,700 people in a box for 14 days, so there was the potential for the virus to spread. Control measures have to be thorough, professional and complete, but I didn’t see that.”

In a statement on Thursday, the health ministry defended its measures on the ship, including those designed to prevent transmissions among crew members, such as requiring them to wear mask and gloves while working, washing their hands regularly and eating meals a certain distance from one another.

The ministry said it had conducted “consultations on appropriate infection control in the ship” with experts and taken a range of measures.

“Unfortunately, cases of infection have emerged, but we have to the extent possible taken appropriate steps to prevent serious cases,” the health minister, Katsunobu Kato, said. “We’ve been doing our best in the circumstances.”

While Japanese passengers made their way home on public transport, those from other countries prepared to return on chartered flights.

A plane carrying more than 150 Australians landed in Darwin – where they face a further 14 days of quarantine – on Thursday morning, while Indonesia said it was to repatriate 74 nationals onboard the Diamond Princess

The British foreign secretary, Dominic Raab, said that about 70 Britons onboard would be flown home on Friday. The US and South Korea have also evacuated their nationals. Other countries, including Canada, have said they will fly passengers home and quarantine them on arrival. In Hong Kong, 106 passengers from the Diamond Princess arrived on Thursday and were sent to a quarantine facility where they will be kept for 14 days.

South Korea reported a spike in infections on Thursday, with 23 new cases linked to a church congregation, up from 14 on Wednesday, in what health officials called a “super-spreading event”. A 61-year-old woman known as “Patient 31” is suspected of passing the disease to others who attended religious services at a church in the central city of Daegu.

With Lily Kuo