The problem is not such much that tipping insults Japanese people, rather that they just don't understand it. It isn't part of their culture.
Consider for instance the difference between Europe and America.
A European might go to a restaurant in America, get charged $38.60 and leave behind two $20 bills.
This is how tipping usually works in Europe; you just round up to the nearest whole unless service is truly exceptional and deserving of something extra.
The staff of the American restaurant however might take massive offense at this. They see it that this person is breaking social rules of tipping 15%. That the American minimum wage rules specifically include exceptions to make it so that you have to always tip to make sure waiters are paid right adds a further uncomfortable slant to the problem.
I've heard many stories of European visitors to the US being insulted or even chased down the street for not tipping the American socially expected amount.
On many things if we imagine the US on one extreme then Japan lies on the other.
In Japan the European paying a 4800 yen bill with a 5000 note will equally cause confusion amongst the staff as would the non-tipper in the US.
In Japan however the staff are not actually losing something by being overpaid like this, thus they are not angry or offended, rather they see that the customer has made a mistake and they must provide good service by making sure the customer gets his 200 yen back.
Try and explain that no, it is a tip, it belongs to them, and its just not something a typical Japanese person is used to. They don't get it. It's like a random man on the street coming up to you and giving you $2. I mean...everyone likes free money but....that's just weird. Its awkward for both of you.
Working in a restaurant isn't a position where you randomly get extra money so it carries the same awkwardness as a random man in the street giving you money.
However. This is not at all to say that monetary gifts are unwelcome in Japan. It must be done very differently however.
Firstly, as in China in Japan gifts of money must be handed over in envelopes. It is considered quite vulgar and uncough to hand someone money, or indeed any present, without proper packaging. Lots of shops carry special envelopes especially for handing over monetary gifts, repaying loans from friends, and other such transactions,
Secondly, to do this in the sense of tossing a few bucks at a restaurant you've only ever visited the once....well its weird. Its the random man giving you small change. Nobody does that.
If however, it is the new year, then it could perhaps be quite acceptable to give a gift to the landlord of a bar that you are a regular at. Maybe it is money in an envelope, better would be that you go out and actually buy something that he likes.
This is how tipping typically works in Japan. Relatively pricey gifts for established relationships. Not a few yen every time you go to a place.