Actually the Japanese recession has been going on since about 1986.
The real problem is one of innovation. What the Japanese, and South Koreans, did before 1996 is to buy innovation elsewhere and than integrate it into the manufactured product. However, owing to the cultural and other factors and that the actual market product had to compete with European or American products, the Japanese still had to wait for the industrial leader to market their product, and than launch their own.
What happened in this type of competition is that, for example the European market leader would invest a lot of funding into a new product, launch it, and gain perhaps 10-20% of the expected market share before the Japanese would launch theirs. Ordinarily the initial market impact is supposed to at least pay for the investment in research and development of the product, so requires maybe 50% capture of the initial market. The Japanese were therefore 'flying a very close wingman' in the market, preventing commercial 'manoeuvre' since new products would be struggling to pay for themselves, never mind generating profits to fund new R&D effort and pay investor dividends.
Now that the Japanese and South Koreans have had to invest in own R&D, to the tune of many billions, the process is stalled.
Essentially culture is hard to change, so it would take at least three generations, i.e. about 60 years (from c.2000), to produce a creatively-thinking demographic.
With the lack of market competition new products are far and between.
However, even before all this happened the Europeans and Americans tried to reduce costs by offshoring a lot of the processes. In this two things happened: domestic job loss and technology transfer.
Job loss produced a smaller taxable base for governments, and they in turn tax those that have the income, the investor types ('the rich') so there is less venture capital for new product R&D.
The transfer of technology means that many developing markets can now effectively compete at least domestically and in some cases internationally. The product may not be as good, but it is cheap. This stimulates the export market (wealthy demographies) and local employment (service industries to fix the substandard products)
The crazy part is that bad product makes better profits than good product. For example the US car maker has to comply with a wide range of safety and other engineering standards to produce a vehicle, so ultimately though the company will try to cut costs wherever possible, it is a basically safe car. Where these standards do not exist or are not maintained, as in China, someone who purchases a Chinese car is likely to a) require more frequent servicing, and b) will likely need a new car twice as fast as they would if they bought a more expensive American vehicle. The US car will therefore be expected to last (with proper maintenance and use) perhaps 20 years, and service costs will only escalate in the last five years. The Chinese car is unlikely to last 10 years, and service costs will likely start to escalate within 2-3 years of purchase. For those that pass the Marshmallow test buying the American vehicle is financially more sound, but here culture strikes again; American are bad at delayed gratification. "Cheap and fast" appears to be the new motto, because people hope that in 10 years time they will have a better job to afford a better car. Except hope is not a strategy, and even the President of the United States these days doesn't have a strategy.
The upshot of this is that if anyone wants to know what the Chinese economy is worth in REAL terms based on application of EU or USA standards, just halve the figure officially quoted.
So you probably never heard this before either because most professional economists are just waiting to see when the Chinese economy will overtake the US economy. The answer is, if one is honest about it, probably in 2-300 years...if both countries still exist in their current economic form. But of course they will not. :-)
And how much of this thinking went into the CT TU in 1977?
Cheers
Greg