Yeah, the LDP lost its chance to do some serious re-structuring, but through the democratic process, there is hope of deep revitalization. China has only one captain at the tiller, and he ain’t willing to listen to anyone, leave alone give up the wheel – even after he’s hit the iceberg.

1.) Japan’s economy is very very very protected from outside competition
2.) Japan’s economy is far more regulated
3.) Japan’s biggest problem has been it’s absolute refusal to make any sort of meaningful change when change is desperately needed.
4.) Japan’s economy is far far less flexible. Economic policy in Japan has always been geared heavily towards stifling entrepreneurship in many areas, especially tech related and instead focus on maintaining massive behemoths such as Sony, while the domestic side of the economy is seen as a way to absorb surplus workers that the prized mastodons don’t pick up. If I wanted to start my own IC design house in Japan, based on what a friend of mine who got her PhD in Hokkaido studying economics told me, it would be utterly impossible because of said regulations. The same is not the case in China where such activities are actively encouraged. In the end it is this dynamicism that Japan doesn’t have that makes it unlikely China will pull a Japan Manuever.

Katz had a good book about it, businessweek has that first chapter posted online for free which gives a pretty good run down of what happened to cause Japan to falter so badly, as well as elaborating on point number 3. Here’s the link if you are interested: http://www.businessweek.com/chapter/katz.htm, I welcome your comments about it.