You could synthetically borrow in other currencies by setting up an opposing position via an FX trade, e.g. on oanda, long 300k AUD/JPY will generate a carry trade income of $1500 per month, partially offsetting an Australian loan of the same size which may cost $2200 per month, so loan costs $700 net.
http://fxtrade.oanda.com/tools/fxcalculators/interest_calculator.shtml
Would require minimum margin of $15,000, which also attracts interest.
But if AUD drops too much against the YEN... you're stuffed.
That's not the opposite - that is adding to the size of the position - long AUD, short YEN. If you do want to hedge, you go short AUD and long YEN, but then you pay interest cancelling out the benefit of borrowing the yen in the first place.
GrossReal, there was another thread not long ago on this same topic, but I can't find it. They were borrowing in Singapore dollars and doing a similar thing.
I like the idea in many ways. As mentioned currency movements are the main risk. However I think it is being overstated in this thread, as the risk can be minimised. To say don't do it because of FX risk is a bit like saying don't buy an IP cause the price might fall. Sure it might, but if you don't sell or get it revalued what does it matter? It doesn't if your in it for the long term.
Same with the yen. As long as there is a buffer, what do short term (which yes, can be large) fluctuations matter? Sure, there will be unrealised gains/losses as FX rates change, but as with IP values, so what? If you can hold a property positive cash flow due to this method, invest the cash flow to build up a bigger buffer/investment, it wouldn't be that many years before the exchange rate would be irrelevant. You'd be building up yen investments for free.
Keep us updated as to progress please!