I think they are not region free.
Each PSP is coded with Region. This includes games & movies. If your PSP is coded Region 1, that means your PSP can play Region 1 UMD Movies, as well as Region ALL UMD movies.
PSP games are mostly Region ALL.
They might as well control the game releases and locale by coding the games with the same type, which I think what "JAPANESE" games are.
Although not all Japanese games will bear coding, some might. Currently, most of the games are R-ALL, and this leaves an open door for Sony to control which games can be sold/played where and when.