Word should be fine for use with Japanese. How are you importing it? And what version are you using? If you copy and paste it should show up fine. It should, in fact, be able to convert between encodings when you copy and paste.
The problem is possibly the code page you've got set up as default. In order to cope with the multitude of encodings that aren't UTF-8, you have to specify which one you normally use. As Shift-JIS is very non-standard, if you're using a different encoding by default then it won't show up properly in applications such as notepad that don't cope with a huge array of encodings.
Shift-JIS is a legacy encoding anyway. It's still widely used, but it's a pretty nasty encoding, and although it is the de facto standard for web pages in Japanese, using UTF-8 is recommended.
Sakura, a free text editor, is the standard free one used for Japanese, but I don't know how it supports Japanese and whether it would have problems on a non-Japanese system.http://sakura-editor.sourceforge.net/