I will reiterate what nahadef said. Tattoos are not as popular here, but some people (young adults) are beginning to get them, especially in larger cities. Onsen and perhaps sento take them with caution when Japanese sport them, especially certain large ones on arms and backs because they are typical of yakuza gangsters.
Foreigners may be banned from such places, but only because the owners don't like their appearance. Obviously, foreigners are not yakuza members. In public, however, don't fret so much. Police aren't going to stop you. Whoever said that is dead wrong.