Bill - do you mean that a .com site, with no DMOZ regional listing for Japan, hosted outside of Japan, appears for a search in Google.co.jp when you select the radio button 'pages from Japan'?
Yes. But you have to remember that the radio button doesn't say "from Japan" it says "in Japanese". So, the option there is to limit your searches to pages in the Japanese language...I think it's similar for other versions of Google as well. Google isn't doing a local geographical search here...it's displaying pages that contain certain language encoding, in this case Japanese.