#9, I haven't read the link in question. I was dissuaded from doing so by the comment that it was 20 pages long and reminiscent of some of SiT's sillier threads. So it's possible I've missed the point the writer was trying to make.
But in general, the scene is like this:
Mainland China simplified many of its characters after the Communist Revolution. This was to make the written language easier to learn and thus increase literacy among the rural masses. Singapore also adopted these simplified characters for various reasons, one of which was to help its non-Chinese population learn written Chinese.
Meanwhile, while all this was going on, Taiwan, Macau and Hong Kong maintained their usage of the unsimplified (so called "traditional" characters). Thetr is more acceptance of "mainland" characters these days, but I can remember my first Chinese teacher in Taiwan warning us sternly not to use "communist characters" in her class.
So there was always a political dimension to this. For decades in the past, Taiwanese writers, or those from Hong Kong or Macau, who used simplified characters risked being accused of mainland Chinese (and thus communist) sympathies.
The Japanese aspect: Japan also simplified many of its characters (adopted directly from China) in the post-WW2 era. However, it simplified its characters not necessarily in the same way as mainland Chinese authorities did. So this gave rise, in some instances, to three possible renderings of a particular character: the traditional one, the mainland Chinese one, and the newly simplified Japanese one.
They were not, and are not not, always mutually intelligible. However, it's often possible to work out the meaning of an unfamiliar character from the context and various other clues.
When the Chinese guy you mentioned (whose name sound like he's a southerner, probably a Cantonese speaker) spoke of Japanese words, he was probably referring to the combinations of characters which were coined in Japan but which are not normally used by Chinese writers. Japanese writers have never been bound by the rules of Chinese vocabulary, and have formed many new character combinations to deal with concepts for which there was no equivalent in the Chinese corpus.
Someone coming out of the Chinese literarry world may not recognize one of these Japanese neologisms using Chinese characters at first, but other such neologisms may be easier to understand and indeed may prove attractive and useful to Chinese writers who encounter them. But the difficulty here may be whether Chinese readers and editors - who may well be purists or language chauvinists - accept them, since they're not really Chinese.
