Is it a genuine shyness or modesty though? I know it's wrong to make assumptions because of how one dresses, but I'd imagine if someone had the confidence to wear something so revealing or attention-getting that they'd have the confidence to take a compliment too. I'm not saying that Japanese in their culture aren't naturally humble and modest like you said, but for those particular few who cosplay or dress so wildly is it still the same case?

You're right in that it is much more modesty than shyness, and it's also true that there are many outgoing and visibly/admittedly confident Japanese people. Though the vast majority of Japanese people who I've met and been friends with over the years have taken the cultural modesty to a level of psychological conditioning from birth, trained shyness if you will.
It is safe to say someone is shy if in any condition they act in that manner, regardless of how they may subconsciously feel about themselves.

As for girls in the awesome cosplay that look like goddesses, yeah seriously, go to akihabara or any other place where you can see a lot of cosplay chicks, talk to them, they are so shy it's so confusing and paradoxical lol.

Maybe there's a higher percentage of cosplay/outrageous-fashion Japanese people who aren't conditioned to be shy as a reflex, but it's still not that many.

If you wanna see non-shy Japanese, go to a dance club after they started drinking, that's about it.

(please don't take this as a form of complaint on my behalf, I love this culture and it's modesty was a breath of fresh air for me after living in a culture of self-centered superiority-complex'ed opinionated idiots)

No seriously Japanese peoples are so timid as you said?

It's not, I knew and know plenty of outgoing people in Japan who couldn't be called timid. Musicians, bartenders, aspiring comedians, horse track patrons...

lol. Sounds like me, dressing up in clothes other than the norm, yet shy

How about for the vast majority of the population?

The vast majority of the population are normal people. I just tend to push back when people make it sound like Japanese people are like squirrels, timid from any human interaction.

I have never asked someone for directions and not gotten an answer in Japan. That's not always true in the US.

Go to a typical restaurant in the US, and it is more like a library. People talk quietly over their meals. Then go to an izakaya in Japan. It's like Grand Central Station with people yelling out drink orders and salary men and college students slurping noodles and getting each other loaded. That would practically be illegal where I live.

If you want to say people are more aware of their surroundings and of the people around them in Japan, I would agree, but that is different than being the most timid people in the world. Stand between an Osaka obaasan and the 50% off table at the Daiei, and you are going to see the opposite of timid. Go to a Tigers bar or a Giants bar on gameday wearing the wrong uniform.

No it isn't like a lot of places in the world, I am sure, but I think this image of Japanese being so timid they are afraid of their own shadows needs to be corrected. (I know you didn't say that, but, again, I am giving an alternative perspective for those that have never and may never get there.)

It seems like we agree with each other then :)

Timid and modest are quite different yes, even though in some situations it can be hard to tell them apart.
The examples you gave are great.

I guess you push back when people call Japan super shy, but I push back when people expect cosplay chicks or extreme fashion kids to have a mentality similar to that of a western mind in the same clothes.
I was quite surprised at first when having conversations with people in those situations, thinking "how can someone dressed like that behave that way?!"

If we compare a western society to even kansai society (arguably the loudest most outgoing society of Japan) I still think it would be like night and day in contrast, don't you?

Also, don't you think most westerners would be more than surprised at the mentality of many people dressed in crazy fashion or in cosplay?

I figured we probably agree more than not.

In my experience with anyone who is a member of a fringe part of society (at least fashion-wise) in Japan, is that they are generally normal people who have a unique, or at least easily spottable, hobby.

I think what people don't realize is that Japan is the most hobby-friendly society, probably in the world.

I was there earlier this year and saw an auction of shinkansen parts. All the densha otaku showed up and paid insane amounts of money for foot rests and overhead shelves from the now defunct 500kei trains.

In Japan I feel hobby is encouraged in a different way, so even if I am made fun of in high school, I can find people interested in exactly what I like either in he community or in college.

So those into cos-play, visual-kei, decora, or whatever are not actors and actresses, but simply hobbyists. Under that makeup and fashion is usually a pretty normal, typical person.

Very well put, especially the last part, just normal Japanese people doing their hobby.
I'd say perhaps a tad less shy or modest, but still shockingly more than most westerners would expect lol