|Foreigners staying in Japan more than 12 months must get a Japanese driver's license. If you do not, you face stiff penalties (including a ¥200,000 or higher fine) if stopped for a even minor offense while driving without a license. Also, your insurance will be considered invalid, so you will be treated as if you were driving without insurance, which is illegal as well.
I found the following site quite helpful, whether you choose to use their services or not: www.japandriverslicense.com. You'll find info about the testing process, who needs to take the written test only and who needs to take both the written and the driving tests. You'll also find FAQs, sample questions, and an account of one man's experience taking the driving test, among other things.
Be sure to have your license translated before you go. This must be done at JAF, but japandriverslicense.com will complete the process for you for a fee. JAF also lists the items you need to take with you, so it's worth it to visit that page. HOWEVER, I went to the Hirabari Testing Center and found that in addition to the things mentioned on the JAF site, you must have a copy of your 'face page' of your current passport and all old passports, copy of your visa page, a copy of the front and back of your alien registration card, a copy of the front and back of your driver's license from your home country PLUS proof that you acquired that license while in your country for at least 3 months. For this you may have to contact your DMV back home, as most licenses just say 'renewed' and do not have the actual date the first license became effective. If you happen to have a US license, click here to find your local DMV. One other thing JAF didn't tell me, you need a pencil, so take one along or you will have to buy one there for ¥100.
There are three testing times at HIRABARI:
9:30 (results at ??) 10:30 (results at 1:30) and 1:30 (results at 3:20)
You are give 10 minutes for the very easy written test, which is written in several languages. I finished in less than 2 minutes and passed. No kidding. After you have passed, they assign a day for your driving test, if you need the driving test. It is usually a few weeks after the written test. You can change the date/time right there, or call in and change it later. If you miss the test and do not call ahead to cancel, you cannot take the test in the future. The first driving test is free, however you have to buy a ticket (¥1000) to pay for the use of the test car.
The driving test is much harder than the written test. I have heard of very few who manage to pass on the first try and NONE who were able to pass without doing the practice course. You can sign up for the practice course after you pass your written test. I highly recommend doing this because you have to memorize the two courses and don't know which course you'll get on the day of the test. Also, you have to learn exactly what the tester is looking for. Most experienced drivers fail. It's a matter of knowing exactly how they want you to drive, make turns, etc. Try to be patient. They will probably fail you a few times. Some people I met there were taking the test for the 5th, 6th, 7th, 8th... time.
Other tips... take something to read or do because you'll spend a lot of time waiting and there isn't much around there, except a convenience store, a coffee shop and a small flower shop. The weather was nice when I was there so I went for a walk. I also brought my computer with me so I could get some work done and wouldn't feel so frustrated about wasting my time there. Also, if you fail, pay for the use of the car and the test fee before you leave. It will save you having to stand in line on the day of your test.