Very interesting. As a native of Japan, I would not really have the awkwardness in mind. In my own opinion, the media like news programs and industrial magazines seems to be the first intelligence to decide how to interpret new foreign words. Basically many people are likely to just follow trends of pronoucing loan words. No matter how Japanized they sound to foreign ears. Yet in the beginninng, there are confusions between people because some news sources interpret differently; as often seen in interpreting foreign　people's names in Katakana. Indeed many people are fascinated to get familar with new words from foreign trendy sources. Recently I have heard "Tricle-down effect" interpreted as just トリクルダウン効果, which sounds so unfamilar to many but already taken as a economical terminology. More and more words are introduced and the pace seems to be faster than many people can catch up with.

Pink used to be referred as 薄紅色. If we hear this expression now, people may think about colors especially used to make some kind of traditional handicrafts or for painting. or maybe used for academic or artistic expressions. I agree with Tobias:so many new things and ideas were introduced through America after WW2. Compared to the time even before, older books and histroical archives are written with more kanjis especially in the Meiji and Taisho periods or older, and Katakanas are frequently used in grammar. People seemed to preferred the usage of old Japanese or Kanji to interpret in their own ways. But there existed loan words too in old Japan, and they sound so hillarious!

I don't know what people in 1700's say pink though,  we can say "桃色（ももいろ　peach color)" instead of ”pink　ピンク”. 

Accoding to this site below, we Japanese had only four color word in Nara period　（710年-794年） and Heian period (794年 – 1185年)　in Japan. The color was " White, black, red, and blue".　Other color didn't exist.　That is very interesting, isn't that?　(^^)

http://rikutu.com/riyuu/012/green-blue.html

@Sheltie,

That's an interesting observation! I guess the Japanese people have a greater tolerance for loanwords than those from other cultures. I was just discussing this with a Chinese friend recently and we agreed how awkward it must be if the Chinese language had been this receptive of foreign 'sounds'. For example, if the word 'pink' were to be rendered in Chinese pronunciation (and spelling), it would be “拼酷” or Pin-Ku. But we know that's not going to be happen, so everyone's satisfied with 粉红 or Fen-Hong (powdery red) for now.

Meiji Restoration

This is not a new phenomenon.

If you remember, whole Japanese writing system is borrowed from China. They also imported all the 3-4 types of pronunciation for those Chinese Kanji and decided to keep all, giving us the current system of Japanese Kanji, where there might be 3-4 reading for same Kanji.

And now it is English. One in Eight words spoken in Japanese vocab today are foreign (Excluding Chinse words) in origin. Not only English, but German, Spanish, French ..you get the drift.

I think this has to do with the Isolation phenomenon of Japan. It seems to me that this is a lashback effect of insulating the people from foreign cultures, now thay are adopting it with extra gusto. Anything foreign fascinates them because of the relative isolation. It just sound smore stylish, high class and better I guess?

But I think this is a great problem. There are borrowed words in any language but Japan is doing it at an tremendous speed. They rendered TV un-intelligible in just 1 generation. I heard the elderly have troble understanding TV today because of the huge amount of loanwords.

Now there is another big problem. The Japanese might think they are speaking English...but they aren't. They Katakanized the English, cut-chopped-added-omitted as they like and create a new word..which might be completely unlike the original one. So, in effect they are speaking Japanese, not English. There is no problem with this, except that they are made to think this is how people speak English. As for now, Japanese language seems to be a bastardization of languages around the world, including japanese.