Most of what I read happens to be in anime fandoms, so I stumble across a lot of Japanese words. This is difficult for me, because I do not speak Japanese at all. (However, I have learned some useful words from fan fiction, such as “Yamete! Iie! Itai!”, so if I'm ever sexually assaulted, I know what to say.)
Although I am always grateful and excited to expand my vocabulary, especially in new languages, a story that is overfilled with foreign terms can be confusing.
The unchecked use of foreign words is a problem. We need guidelines, and I would like to offer some here. Although this article deals specifically with stories written in English, the same principles apply to stories in other languages.
First, let's consider exactly why indiscriminate usage is a problem. For the most part, your readers don't understand these words. Therefore, they have less understanding of your story, and they may become frustrated and stop reading. Your ideas aren't being expressed, and you may appear silly, selfish, or show-offish. Once you think about it, you will plainly see that it is in your best interest as a writer to deal with this issue wisely.
*Because you're excited about your language skills. I know, I know—when you know and love something, you want to find ways to incorporate it into whatever you're doing. Trust me, I feel for you—I've been guilty of this one myself (with my beloved Russian). But remember, it is unkind not to consider your audience.
*When you don't understand the rules and vocabulary of the language you're using. Make sure you know the exact meaning of a word before you use it, which means that you should be very careful when using words from languages that you do not speak. Do not use foreign terms that you found in other fan fiction. This should go without saying, but if you don't know how to properly conjugate, decline, or—Heaven forbid—spell the words you're using, you will look like an idiot.
*When the foreign words are stylistically inconsistent with the story or otherwise distract from it. For example, it doesn't generally make sense to have Mayan fishermen tossing around ancient Aramaic farming terms. Anytime the reader has to stop and think, “Wait. Is this anachronistic?” change something in your story.
*When there's a perfectly good English word that will mean the same thing and be more clear. I would like to use the example of my now least-favorite Japanese word: demo. There is no reason to use this word in an English fic—ever. It doesn't add anything to the story, and it distracts the eye. We have an English word for that, so don't give me any ifs, ands, or buts.
*For entire conversations. I have read stories where the characters converse in Japanese, punctuated by “he said” in English. What on earth are these authors thinking? Japanese or English—choose!
*When your audience can't be reasonably expected to understand the word. If you're writing for a bilingual group, you have full license to use words from both languages. If the word is in common usage among your set, you may also use it, as long as you do it for the sake of advancing your story (and not to make an impression or to revel in the heady wonderment of a new vocabulary word). However, if the word is one that you don't think most of your audience will understand, then you have no business using it.
*Untranslatable words. If a foreign concept can't be translated into one English word (or at most two), then you may use the original word. Often these are words for things that don't (or didn't) exist in English-speaking countries. Some examples are: dashiki, caftan, balalaika, dhow, kung fu, kimchi, hara-kiri, shogun, basmati, mahout, kibbutz, schadenfreude, caiman, yashmak, ziggurat.
*Words that have come into common English usage. These are often indistinguishable from the above, for obvious reasons. Half the words in English fall into this category, if you go back far enough. Some examples are: chutzpah, pariah, bivouac, guru, mantra, intelligentsia, fetish, kowtow, incognito, hallelujah, blitz, panache, kiosk, papaya, harem.
*When meaning can be inferred by context. Use sparingly! This may be done to create a more “realistic” feel, but it should not turn the story into a vocabulary lesson.
Effective: “Bozhe moy!” she cursed softly.
Annoying: “Zachem?” he asked. “I don't know what for,” she snapped.
*When a character is actually speaking another language that other characters can't understand. But remember, the audience won't be able to understand, either.
*Use correct spelling. Otherwise, it will take your readers a moment to figure out what you mean, and then they will laugh at you.
*Take care in choosing a transliteration style for languages that use non-Latin alphabets. (For example, in Japanese, is it “ű”, “u”, or “uu”? In Russian, is it “j”, “i”, or “y”?) Aim for understandability, which means that you must be consistent and should probably choose the standard method of transliteration when applicable.
*Put foreign words in italics, unless they are names/titles or are otherwise used repeatedly as part of your story's vocabulary. This rule obviously does not apply to words that have become part of standard English.