Upon returning from my month-long trip to Japan last year, I noted that the state of the country as evidenced by what I saw was very far from matching the impression one gathers reading about the Japanese economy from afar. The public facilities were as immaculate as ever, the streets remained utterly safe, people were as well-dressed as I'd ever seen them (i.e., much better dressed than the average Londoner or Berliner), and all of the young people seemed to be carrying the same sorts of technotoys which are popular in Europe and the United States: in short, in the course of my travels from Tokyo to Kyoto, Kobe, Tokushima and Nara, nothing I saw gelled in the least with the incessant stories of Japanese stagnation I'd encountered in the Western press. Issues of space aside, I could not find any evidence to support a belief that the Japanese standard of living was lagging behind that of the average Western European in the slightest - on the contrary, the very opposite seemed to me to be true.
At the time I'd ascribed the discrepancy between what I'd read and what I'd actually seen down to flaws in the usage of GDP as a measure of economic prosperity*, but what I'd overlooked entirely was that most of the gloomy writing about the Japanese economy has been based on considering total GDP growth, without accounting for the fact that Japan's aging population is actually shrinking. In fact, when examined on a per-capita basis, Japan's GDP growth over the 2001-2010 period has actually surpassed that in the United States and Eurozone, and this has been accompanied by enviably low unemployment rates as well as a level of quality of service in the non-manufacturing sector which Westerners can only dream of. If this is what stagnation looks like, then we should all wish for it ...
Of course, all of the above isn't to deny that the Japanese economy does still face particularly thorny challenges. For one thing, it isn't clear just how much more headroom for total-factor productivity growth there will be in an economy dominated by octogenarians, even on a per-capita level. For another thing, I am doubtful that Japan's retirees will be as easily convinced to renounce their claims on the future production of the young as some of the Economist's commentators seem to believe.
*A position I still adhere to, by the way. For instance, GDP fails to take into account how pollution detracts from well-being, nor does it comfortably accommodate the idea that goods and services can actually increase in quality without increasing in price.