A friend gave me a couple of Japanese CDs, which I added to my music collection. When I opened up an XTerm and listed out the directories, I found that the Japanese filenames weren't displayed correctly. Where the characters should have been, there were only empty boxes. Clearly this was a font issue.
As far as I can tell, you only need to add two lines to your .Xresources file:
You could also set the wideFont resource, but I didn't bother. By default, XTerm will simply double the width of the font you specified. For example, the font above has an average width of 90. So the wide font gets a width of 180.
If you want to see which fonts you have at your disposal, run xfontsel and play around with the various pull-down menus.
Then you merge the updated file
xrdb -merge ~/.Xresources
and you're good to go. The next XTerm you open will display Japanese characters perfectly.