Pretty much. The translation thing is really for creating... translations of your game in different languages. I just saw there's a translation example in the demo projects. (I haven't tried to follow the instructions and create my own translations, but I assume that these .xl files of yours were created following these steps...)
I suppose you can display both Japanese and Latin characters using this system — after all, rōmaji scrip is quite common in Japan, so there's no reason why it couldn't be included in a translation.
But what I was after was not really a translation, though that may come (much) later. Just wanted Japanese characters in the default language version. If that's all you need, then just follow the tutorial I linked above (and don't forget to set the character set right when importing the font), set the global font, restart and you'll be done, it's as simple as that. (And of course you can still use "Latin" characters. Anything unicode in fact, if you have the proper font.)
Note that Japanese characters can still only be entered / copied as unicodes in the editor. Copiying a こんにちは! string will give you dis\u3053\u3093\u306b\u3061\u306f\uff01 in the script editor, which not terribly convenient... But when you start the application it displays all right, so that's the most important.