I'd like to throw my 5 yen in here.. I've been living in Japan for about 3 months now, and I've just joined the Rocket program to try and accelerate my learning. I visited Japan for about a month last year with my kendo team, but now I'm in another part of the country working full-time as an English teacher in a public junior high school.
As some of the people here have been saying, your mileage will vary tremendously. I live in a very small city and work one town away in a very rural area (as an example, my school shares property with a goat farm). Because of this, my costs of living are significantly lower than many other people I've spoken to who all have their hearts set on living in Tokyo. (From Chiba prefecture where I live, Tokyo is about 2 hours away by train, which isn't so bad for going in on the weekends to have fun if I'm in the mood.) I pay about 5.5man for a small but very modern 1K, but I end up paying about another 1man a month on utilities (less when it was cooler and I didn't run the air conditioner). Like a lot of my Japanese co-workers, I buy the school lunch on a monthly basis (between 4-6sen a month depending on how many school days there are) which is an enormous bargain for a large and very healthy meal. I also volunteer to help with the tea lady and the cafeteria when my schedule permits, and they tend to return the favor by slipping me some extra food, so my food budget is very reasonable. Living in the countryside also has the advantage of being able to buy lots of fresh vegetables, fruit, and fish very cheaply in town (I like to cook for myself), which also gives me an excuse to meet and chat with my neighbors. I help the PE teacher train the kendo team at school, so I have free use of the village dojo and get to train with the children, which is even more language practice outside work (and a great workout)- this costs me nothing, compared to the price of joining a dojo in the city.
I can buy a monthly train pass for my commute which runs me about 4sen, and saves me about 20% of what I'd pay if I bought tickets daily, but since I like exercise, I usually prefer to take the 30 minute bicycle ride to and from work when the weather allows it.
I'm saying all this because I hear an awful lot of people talk about how expensive it is to live in Japan, and truthfully, there are plenty of ways to save money. If you're courageous enough to get out and explore the community you live in, there are bargains for everything (ask an obaasan very politely in the shopping center and they'll let you in on the secrets of where to shop). I always have plenty of money left over each week to go to the amusement center in town to watch a movie or eat out, and my job doesn't pay a lot of money compared to others (about 225,000 a month).
The JET program is very competitive and most people that apply don't get in, as space is extremely limited. It's also only open to very young people, usually current college students (I'm 33 years old and had to get here myself). I wouldn't rely on JET as the best way to come to Japan. There are many, many companies hiring English teachers, and they offer a very wide range of salaries and the level of support they give you. Unfortunately, with the economy doing very poorly in most Western nations right now, a lot of young people have decided to try working abroad- because of this, there's a very large surplus of applicants, and so the jobs don't pay quite as much as they used to and conditions aren't as... kind. You'll have to do quite a lot more on your own than you used to, and if you don't know anyone in Japan and don't already have a strong foundation in Japanese language, it can be very rough. (Try to imagine finding an apartment and signing paperwork when you can't read or write any Kanji!)
You should not assume that you will encounter many Japanese people that can speak English, either. If you don't live in Tokyo, Osaka, or Kyoto, the number of native people with English skills decreases dramatically. In my school, for example, the only people that can speak ANY English are the English teachers, and none of them would claim to be fluent. I haven't met anyone in my town outside of the schools that can speak more than perhaps one or two words of English that they know from television or music. This can be a lot more isolating than you'd expect if you don't have strong Japanese conversational skills. All of these things are much easier if you live in Tokyo or the other large cities, but there's a trade-off there, too: the cost of living becomes significantly higher, and the competition for those jobs is much higher (everyone wants them).
I hope some of what I've shared is a helpful "reality check" for your future plans. I'll be happy to talk more about my experiences in Japan, but you should always, of course, defer to Sayaka and Derek-sensei and the other professionals.