I agree with rtpg on this one - and disagree with the Diego.
I also read/type Japanese (my writing out of lack of continuing to write on a daily basis has gone to the dogs). With four years in Japanese universities and 20 years living in Japan I had the opportunity to experience what it is to get reasonably proficient in a second language.
The synaptic connections you can make by understanding 'most' of a compound kanji (multiple characters joined together) along with parts of the kanji makeup for a specific kanji you do not know puts you in an incredible position to figure out what the word is likely to mean.
Regardless, once you Japanese gets to a point, you begin to realise it is less about the meaning of words and more about the context and usage of language. You find yourself understanding how to use some words you have not studied without having said to yourself 'so what is this word equivalent in English' - and at times there is not a word equivalent in English. That is when you realise you are thinking in Japanese not just translating.
Synaptic connections, context and knowing what the relevant responses to how you want to respond are the key to fluency in my opinion. This is also the case for writing emails etc.
This also explains why people who do homestays where they get to watch people interact with each other progress faster than someone who goes to live with their significant other half. If you are involved in half of the interactions you get less opportunity to mimic the common responses.
Sorry for digressing a little on this one. Once you get that 777 kanji mark you would be well on your way to being able to contextually understand much more for the kanji/sentences you do not fully comprehend - which in turn leads to more kanji being 'gut-felt' understood if not fully formally learnt.
An additional benefit once you get some proficiency is that you can hear a word you do not know - but you can guess the half of the kanji being used in the compound word (and confirm by asking) and that gives you some context of what the word means. Very much like using latin/greek roots in English to breakdown words.
Time to go back to my coding before the day gets away from me. I just needed to respond to this one because I thought Diego's opinion on language learning was too far off the mark from my experience with it.