I do not have time for a full reply right at the moment, but ethics and morality can be taught outside a religious framework...the motivation behind such actions, however, will be differently motivated.

I would suggest a quick Wiki search on Social Contract Theory. ("Since I do not wish to be killed by you, I will agree not to kill you in exchange.") This may be of help since Social Contract depends a great deal on motivated self-interest...and it sounds like your studens have plenty of that.

I am curious though: What is the down-side to their behavior? What are the repercusions should they not graduate? Where do they get their money now for cigarettes and CDs? Are Mom and Dad simply going to support them forever? Do they ever talk about their hopes and dreams for their own future? Or are they basically nihilistic in their outlook? (I must admit, this is not the picture of Japanese culture I had in my head. I was under the impression that duty and honor were instilled to a great degree in Japanese children. It seems I stand corrected...)