I have version 2008.3.1125.20 of the Telerik RadControls for ASP.NET AJAX.
Does some newer version of Telerik.Web.UI.dll support Japanese language in the chart? Currently, all I get is squares showing up in place of the actual characters.
RadChart supports Japanese characters. Please, make sure the machine you're testing on has the required East Asian language support. I have attached a small example -- both page and resulting chart. You can find some details on enabling multi-lingual support for different OS-es in this article.