Hello
Well Japan on a budget is hard since their economy is designed to be more expensive, especially in the city since the Japanese mindset is to have a larger disposable income. Main recommendations will be to look at cheaper lodgings and eating cheaply. If you don't speak Japanese this can be done rather easily by consulting the pictures and the yen prices outside a restaurant before going in. Also McDonalds is big in Japan ... lol. Groceries can also be bought easily too and Hyakuen stores (100 yen stores) can provide good cookware if needed. As backpackers I'd avoid Tokyo and maybe head by train to Kamakura and Hakone. They are goregous, full of cultural goldmines (like the Hachiman shrine, the giant Buddha, and the Customs check in pass as well as the Castle in Hakone).
Lots of small grocery stores where for not much money you can get readily made sandwiches, and bottles of drink. There are guesthouses which aren't badly priced, for Japan. I got one from an information office (Shinjuku station, I think?) which was situated an easy subway ride from central Tokyo.
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