Hi Sookie,
1.)Yes the Chinese New Year is celebrated in Japan but it is not a national holiday, meaning that stores and restaurants will be open during normal business hours (except for some Chinese establishments perhaps).
2.) In February it is Winter in Japan and it can be cold, so pack carefully.
3.) Since you are in the Osaka-Kobe-Kyoto Area (Called the Kinki Area) consider visiting Nara and/or making a day trip to Shikoku by crossing the Akashi Kaikyō Bridge.
4.) If you fly in on Kansai Airport (Osaka) then it is most likely not worth getting a JR Pass. Consider buying the Kansai Area pass.
You could also use this pass to go to Himeji and visit the castle there, I think it is one of the most beautiful castles in Japan.
Also for the best place to Celebrate the Chinese new year go to Kobe, the Chinese community it quite big and the local China town is famous for being the most extravagant in Japan.
Enjoy your trip!
Daniel