Yes, TRUE.
A good Canadian friend of mine had a Chicago cubs (u.s. baseball team) tattoo on his right arm.
Kind of silly, but apparently any tattoo has yakuza (Japanese mafia) undertones, which makes many Japanese, especially older people, uncomfortable.
Attitudes seem to be changing and I even knew a few younger Japanese with tattoos, but the perception remains in the mainstream of society.
There is a simple solution, however -- my friend just covered his tattoo with a large band-aid when going to the gym or public baths.
Problem solved.
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Tattoos or Irezumi as they are called in Japanese were criminalized in the beginning of the Meiji period (some time after 1868) as a way to make a good impression on the west.
(A bit ironic in this case...)
It was legalized again after the war in 1948 but still retains its image of criminality.
For many years, traditional Japanese tattoos were associated with the yakuza, Japan's notorious mafia, and many businesses in Japan (such as public baths, fitness centers and hot springs)
still ban customers with tattoos.
(from wikipedias Irezumi article)
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In Japan, tattoos are not a fashion statement, they are a visual mark of being a member of the yakuza and thus a social outcast.
So "No tattooed people allowed" really means "we don't want the mafia on our premises".
Most Japanese are probably aware that tattoos nowadays have rather different connotations in western countries, but they're not going to make exceptions to a straightforward rule and risk being accused of racism or double standards.
travel.stackexchange.com/users/1371/Michael Borgwardt
At least one onsen has recently (September 2013) refused a Maori woman with a traditional tattoo.
From Tattoo ban at bathhouses raises concern in Japan : TOKYO: With the Olympics headed to Tokyo, Japanese government officials are raising concern after a New Zealand woman with a traditional Maori tattoo was recently denied entry to a bathhouse.
Tattooed Maori woman barred by Japan public bath indicates that the woman was 60 years old.
So being old, female, and having a traditional tattoo doesn't help in some circumstances.
travel.stackexchange.com/users/324/Andrew Grimm
Now I don't speak any Japanese but this Japan site with tips on Onsen bathing (in German) includes a link to a site with a directory of tattoo-friendly spas/baths/onsen .
Since it is in Japanese only
and I know next to nothing about that I can't judge for its content, but it does seem very legit.
travel.stackexchange.com/users/32134/mts
A friend of mine is currently traveling in Japan. She has a small tattoo on her neck. Now she wanted to visit a public swimming pool but was denied entry.  It was difficult to understand the reason but it seems that tattoos "look too dangerous".  Can someone explain to me if it is true that you can't visit a public swimming pool in Japan if you have a tattoo? And if so, what's the real reason for it?
I have a tattoo. Can I visit a public swimming pool in Japan?
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<japan><regulations><local-customs><culture><swimming>
travel.stackexchange.com/questions/3631
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Tattoos were criminalized in the beginning of the Meiji period (some time after 1868) as a way to make a good impression on the west, and now they are a visual mark of being a member of the yakuza and thus a social outcast. Having tatoos will make many older Japanese people in particular uncomfortable, but you can probably still visit pools if you cover your tattoo with a large band-aid. There is also a site with a directory of tattoo-friendly spas/baths/onsen. Covering up your tattoo is considered necessary when visiting public baths in Japan. This is because tattoo are banned in such places as a result of their association with the yakuza. Alternatively, search out tatto-friendly baths.
Tattoos are not allowed in most Japanese public baths. This is the result of tattos being associated with the yakuza and dates back to 1848.  If you wish to visit a public bath in Japan and have a tattoo, either cover it up or search out some tattoo-friendly public baths.