What's the best way to organize a trip to Japan with a tight budget?

Those of you who have been to Japan, I'm curious about your insight (especially you Europeans). How super crazy expensive is that really?! What would the best + cheapest option be? My friend told me that she's planning on going to Japan next year with a friend of hers. She said they were thinking about a cruise because it was the least expensive option. That sounds nice, I guess, but you know what cruises are like, right? Usually more time onboard than in any country... She confirmed this when I asked for more details: they will only get to spend three days in three different Japanese cities. To me, this sounds like kind of a waste, when you go as far as from Sweden to Japan... If you go on a guided tour trip, on the other hand, you get to see a lot of the country but on the other hand, she said, that sounds pretty intense and it's a lot more expensive. Well, my thought is: Why not just organize your own trip and decide what you want to do when and which places you want to see? In your experience, would that be a lot more expensive? Would it be too difficult to organzie this and travel in Japan with a tight budget and only basic Japanese language skills?

In my opinion, guided tours are actually super crazy expensive. I looked at some prices, and I think they mostly take advantage of the fact that a lot of people don't really have an idea about the real prices. i also admit that not speaking Japanese would probably be a big obstacle, especially if you go outside the main cities. Some things are soo much more expensive than Europe (I'm talking to you, fruit! And deodorant!), some things are much less, but mostly you get the right value for what you pay.
I speak Japanese so I don't really have any tips about how to get around with no Japanese knowledge, but here's what I can give to you:

1. If you want to avoid expensive, just skip Tokyo. Or don't make it the main part of your trip. Whatever you buy in Tokyo, at least in the central area, be aware that you can probably get the same thing for half the price in the rest of Japan.

2. If you wait for the right offer and you're a bit lucky, you can find flight from Europe for (relatively) very cheap, so don't just go for the first 1000 euro flight you see.

3. If you plan to move around a lot, consider purchasing a JR rail pass. Depending on your travel plans, it could be way cheaper than buying every single train ticket. 
http://www.japanrailpass.net/eng/en001.html

4. Hostels are the way to go! They're generally cheap, clean, well kept and have English speaking local staff who will be happy to give you useful tips on local sights and events.
http://kyoto.j-hoppers.com/
http://backpacker.ninja-x.jp/

5. I agree with everything that's been said on food. Also, if you have someplace to go eat, you can also consider purchasing a bento at a supermarket, they're made with fresh ingredients and usually quite cheap.

6. Avoid buying whatever in a conbini. I know they're everywhere and very useful, but they usually double the price of everything they're selling. It seems a small thing, but it adds up in the long run.

Feel free to ask any question! :D

Thank you for your replies! (I haven't been on the forum lately so I didn't read until now.) Since I wrote my first post, my friend has already made up her mind about the trip. In the end, she and her friend decided not to take the cruise mentioned above, but another one! (A longer one, but not more than ten days, with a few extra days in Tokyo.) So they'll still go for that option. The main reasons are that it would be all inclusive (well, except for the days in Tokyo...) and they are thinking that they wouldn't get around on their own, because they only speak a little Japanese. Actually, I think it's mostly because they're nervous about travelling in general (it doesn't matter which country, finding your way from point A to point B can be too big an adventure...) but at the same time they've been dreaming about Japan for years so they tried to find the "safest" way. Well, personally, if I was going to Japan, I would take the advice and try to find an affordable plane ticket, avoid Tokyo and so on... What you describe sounds doable to me! I'll remember it when I get a full-time job so I can save enough money to go myself. :)

Sakakibara's post pretty much covers everything.  
Also, in regards to the JR rail pass. I'm not sure if it's still like that, but when I went to Japan 4-5 years ago you had to get the pass BEFORE you went to Japan. So maybe look in that. I'm not sure if it's like that only for Americans, or if it's even still like that. 

Best way:
1.  Learn Japanese to the best of your ability (watch lots and lots of dramas ... without english subs :))
&
2. Save up for a plane ticket & some spending money for food 

Then when you arrive...
1. Couchsurfing (free lodging and see interesting places!)
&
2. Hitch-hiking (free travel ... and meet interesting people!)

Also, bring a tent and camp. You can meet some of the most colorful friendly people at campgrounds.