It depends on where you are I think. Sitting up north in Saitama and south in country Chiba (country = no keitai reception ) people were generally nice and fairly unassuming, first glance I'm a foreigner, may or may not know Japanese so I'd get a smile and slow simple Japanese, and depending on my answer they'd sometimes pick up a conversation (had a memorable one in a 7-11 amd another in Mos Burger on a quiet evening).

Never had any trouble with the police, and the one time I approached them to see about getting my bike back after it was stolen went well (they originally blanched at the idea of me rocking up at the local station as noone spoke Japanese, so I had to wait while they got someone who 'knew english'. Ended up speaking Japanese anyhow, which kinda voided the original idea). But I have to admit its nice that they make the effort.. (same thing here in Aus, I've dealt with 2 customers over the phone who were Japanese, their english is good but its nice to have someone who knows what you mean in your mother toungue... or at least sounds like they know :P)

There are thousands of foreign (mostly English) katakana words in Japanese, and the number increases fast each year. What other language on earth continually imports so many words from outside nowadays ? But yet, the words are often given a different pronuciation and meaning from the original ones, principally because of the ignorance of the masses who use them and the little care of the authorities to educate them.
Hilarious segment on the evening news on day, I think it was the NHK news... they were on about this. They got 2 fairly recent imports, 'simulation' and a political related one, I forget it right now... and asked people if they knew the word "oh simulation? of course!) and what it meant (ah.. umm... *insert something waaaay off the mark). Was interesting to watch.