I’m not the first person by a long shot to make this point, but it’s fairly amazing how much of Japan’s relative slide since the early 90s can be explained not by economics per se but by demography.
Using the Total Economy Database — another useful source — I find that from 1992 to 2007 (eve of the crisis), Japanese GDP per capita fell from 88 percent of US GDP per capita to 76 percent. That sounds bad, and it is. But about two-thirds of that decline can be explained by the aging of Japan’s population. According to the OECD factbook, in 1992 working-age adults were 69.7 percent of Japan’s population, compared with 65.5 in the US; by 2007, the Japanese number was down to 64, while the US number was up to 67.
Demography is not the whole story; Japan has stayed depressed, deflation is a problem, labor markets are poor (although the trouble tends to show in rising numbers of freeters rather than high measured unemployment.) Still, when you look at Japan’s declining share of world GDP, and even its relative decline in per capita GDP, the biggest single cause is the declining number of working-age Japanese.
http://krugman.blogs.nytimes.com/2010/09/08/japanese-demography/