yeah our japanese communication skills are pretty poor hahah the only times we are exposed to japanese is when we're doin a reading task or if someone is reading a passage from the textbook :S
You've no absolutely reason to feel bad about your communication skills... it's obviously secondary school language education that's the problem.
Also, Fyrefly - the reason that most people find listening to be difficult is because of the intricacies of the information.
For example, we can hear that the tour group is meeting in the park. But it is challenging for most to pick that the tour group is meeting in front of the park next to the church down the street.
Yeah?
Hmm... I guess...
Look, given what you guys have explained... I think the only way for you to improve is to practice more. You guys really need to increase your exposure. Watch Japanese news (online, don't wake up 5:30am), youtube stuff, watch J-drama with high school themes (more familiar vocab), and watch anime.
If you choose to watch anime or J-drama though, make sure you actually concentrate on listening... don't lose focus and just read the subtitles. For example, find a friend who likes anime too, and pick an episode (no subtitles). Write a quiz for each other using that episode. Perhaps dictation Qs, multiple choice Qs, translation Qs, and (perhaps more challenging) one or two open-ended Qs such as, "If you were Naruto, what would you have said to Sakura when..."