Definitely true that nothing will boost your language learning speed like studying in the country. It's also pretty much the only way to become really familiar/proficient with newly developed phrases, speech patterns, and colloquialisms.
As for how much living expenses are in Japan, I imagine it's a similar situation as in the U.K., in that it heavily depends on which part of the country you're staying in and what sort of lifestyle you want.
If, for example, you're planning to live/study in Tokyo, a budget of around 80,000 yen a month should give you a lot of studio apartment options that are within a manageable commute of downtown. 10,000 yen a month should also be enough for a commuter pass that'll cover your route to/from school. For general expenses (groceries, toiletries, utilities) 50,000 a month should be enough. As for weekend/after-school entertainment, that's going to depend heavily on what sort of things you like to do, so I can't really give any estimate.
I'm sure people will chime in saying those budget figures are too high, and you can definitely survive cheaper than that in the Tokyo area if you're willing to live farther outside downtown, have a smaller apartment, make sure there're no transfer tickets involved on your commute to work, stick to meals that stretch your grocery budget, etc. The numbers above should give you a little more flexibility in choosing where/how to live, though.
You'll also need money for move-in/initial apartment contract fees. These vary by apartment, but can be up to the equivalent of six months rent.
You'll also need money to set up the apartment. You can get a lot of kitchen supplies at the 100-yen store, including dishes and silverware, but things like furniture, bedding, and appliances (refrigerator, washing machine, microwave) are going to be more expensive. Japanese apartments often don't come with a cooking range, so you'll need to buy one, and it's not uncommon for them not to have a heater/air conditioner or even interior lighting in some rooms, so those are other things you'll need to buy. All of these prices will, of course, depend on the exact products/brands you're buying, but I wouldn't expect them to be any cheaper than such things are in the U.K.
Finally, since you asked how much you should "save up" to study in Japan, another thing to consider is whether or not you'll be working part-time while you're studying.
As a frame of reference, the starting take-home pay for most expat English teaching jobs in Japan is somewhere around 240,000 yen a month. For most people, that works out to be a feasible amount for modest, live-by-yourself in a studio apartment lifestyle, though not a particularly luxurious one.
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