Do they not have sarcasm in Japan?
 

I wasn't sure about this because I looked up "sarcasm" in my Japanese dictionary and it wasn't there. Do they not ever joke like that? Or do they just not call it sarcasm?

Which dictionary are you using?
sarcasm - General - Tangorin Online Japanese Dictionary
sarcastic - General - Tangorin Online Japanese Dictionary
Though I've heard several times that sarcasm doesn't work well in Japanese, and my own Japanese isn't good enough to confirm or disprove that :/

Sarcasm exists - it`s not completely unthinkable - but it`s always considered very nasty and cruel. The situations it is used in also tend to be very limited. (I can really only think of one common situation where you occasionally hear sarcasm.) The type of sarcasm you do occasionally encounter is very straight forward.

Sarcasm's not used so much in Japanese humor. Parody often is, and satire sometimes, but as Nyororin said, sarcasm is usually seen as pretty harsh and rude. One word for it, れいひょう　冷評 also means to sneer or jeer.

You do get irony, which can prompt a good laugh. Like when it was pouring with rain, I used to sometimes say to the bike-lot attendant, "Wow, lovely weather today isn't it?" but just going by the reactions I used to get, ("*laughing* Whaaat? What's good about it?" "I'm from England, it's totally nostalgic!") I don't think it's too commonly used by Japanese people themselves. But I'm not sure, so don't take my word for it!

Of course they do

Just go to any Japanese website/blog/2ch and start reading. You'll see just about everything.

君はWii発売日にヨドバシ秋葉で起きた『ルイージ事件』 を覚えているか？ : はちま起稿

Plenty of nasty comments/sarcasm here

I read Japanese websites and blogs daily and sarcasm is not typical.

I see sarcasm quite often...especially when they're cussing out the gaming industry or criticizing games or whatnot.

Sometimes on political forums you'll see some sarcasm.

Well,if they're gonna be like that......I don't call people gay,I don't do any of that stuff! I use sarcasm to refer to things like the weather,and TV programmes. I have started swearing,because I'm at college and I'd go mad if I didn't swear at college.

You can't change who you are too much can you? You've gotta draw a line somewhere. I'll just have to explain myself,where I'm coming from etc.

What would that kind of situation be?

1)angry
2)To a hateful person
3)Place that can be written by anonymity on the Internet.
4)crooked person(me)