Japanese developer shugonta, who was part of the Japanese team in the Imagine Cup 2010 finals, has released JPInput, an app for typing Japanese text on Windows Phone 7. Like the other Japanese character apps we know of, SongTweeter and Utakata/Flickpad X2, it uses hiragana text inputs which can be converted to kanji using the Social IME web service.
It can currently send Japanese text to WP7’s search, mail and text functions. While official Japanese-language support is not scheduled until the "Mango" update some time in the second half of 2011, hopefully JPInput in combination with the long-awaited copy and paste update will be a decent stopgap. You can get JPInput here.
Thanks Tezawaly for the tip.