Are Japan's 'lost decades' a myth or not?

A NYT oped over the weekend said that it was - that the country has done a lot better than the economic numbers would suggest. The piece by Eamonn Fingleton says that the normal measurements belie a largely prosperous nation. "Japan has succeeded in delivering an increasingly affluent lifestyle to its people despite the financial crash. In the fullness of time, it is likely that this era will be viewed as an outstanding success story," he writes. That success is reflected in everything from Internet infrastructure to life expectancy. Deciphering what actually happened in Japan could be an important clue in understanding the U.S. economy. From the Times piece:

William J. Holstein, a prominent Japan watcher since the early 1980s, recently visited the country for the first time in some years. "There's a dramatic gap between what one reads in the United States and what one sees on the ground in Japan," he said. "The Japanese are dressed better than Americans. They have the latest cars, including Porsches, Audis, Mercedes-Benzes and all the finest models. I have never seen so many spoiled pets. And the physical infrastructure of the country keeps improving and evolving."

But Matthew Yglesias says that the contrarian argument can only go so far. For one thing, Japan's hours worked per employed person has fallen steadily. For another, the youth unemployment rate has soared.

All of this is signs of a country that spent the years 1990-2005 experiencing a lot of excess capacity in its economy. Had their been sufficient demand, Japan had the capacity to produce more. For a brief period of time, Japan got out of the muck and these indicators went in the other direction but then came the global recession which pushed them back down again. What Fingleton's good points go to show is that it's possible for a society to cope better or worse with a prolonged -aggregate demand] shortfall and that Japan has proven to be pretty good at coping. But why settle for coping when fixing the problem is an option?