Partly it was the location: An upper floor of a building in a neighborhood full of bars and pachinko parlors, which seemed much sleazier to me then than it would now.
But more it was, I think, that I didn’t understand yet why Japanese college students and office workers would pay money to practice English with me and a few other recent foreign arrivals. The fact that much of the conversation consisted of the customers asking me personal questions—“Where are you from?” “Why did you come to Japan?” “Do you like Japanese women?”—made me suspicious, too.
In retrospect, the place was almost certainly not a front for anything sinister but just a way for the owner to try to make some money from the shortage of opportunities to speak English in Japan. And the focus on personal questions was just a sign of the customers’ limited repertoire of conversational English. But it took me a while to grasp all that.
I’ve only visited once, but my impression of their urban areas was that Japanese zoning laws and planning permit are very different to even UK ones, and worlds apart from American ones. I assume there’s some centuries-old historical reasons that I’m just not aware of.
There are residential houses sandwiched between restaurants, perfectly legitimate businesses built on top of some ‘perfectly legitimate’ businesses and underneath other even shadier businesses. This definitely means that any district with a focus on entertainment will often seem sketchier than it really is.
Spend enough time in Japan, and you realize that young to middle-aged Japanese people really do understand that competence in English will give them an edge -- but they don't know where or how to go about learning so they will try damn near anything, especially if they think it's easy or a "shortcut". There's potentially a big market for apps like Rosetta Stone or Duolingo over there, I don't know how things like that are actually doing among Japanese though.
When I was hanging out in bars there, young women would approach me and beg: "Teach me Englishu!" They saw that I was white and foreign and figured I could just pour English fluency into their heads.
As for the personal questions -- yeah, I've undergone enough foreign-language instruction to understand that these are things people resort to just to have something to talk about. One question that kept coming up was "Who is your favorite singer?" Just about everyone who asked me this also provided their own answer to the question and it was always the same -- Lady Gaga. (The album Born This Way had just dropped in Japan at the time and Lady Gaga was all the rage -- bigger than One Piece, even.)