The past year has underlined how Japan's future is inextricably linked with that of China and, by extension, why it may have to stop thinking of itself as an economic superpower. As Japan staggered through one of the hottest summers in recent memory, confirmation arrived that China had replaced it as the world's second-biggest economy, after the US.

The Japanese reaction ranged from studied insouciance – it wasn't as if it hadn't been warned – to resignation and anger. Some questioned the validity of GDP figures as a reliable indicator, pointing out the vast differences in per capita income between the two countries.

Conservative commentators, meanwhile, issued an increasingly hollow-sounding exhortation: that in the Asian context at least, Japan should never be comfortable with second place.

But with some economists expecting Japan to give way to several other countries, including the likes of Indonesia and Turkey, by the middle of the century, the icy blast of economic realism from its neighbour has left the Japanese approaching 2011 in contemplative mood.

After 20 years of stagnation, a decade of battles with deflation, and the dual spectres of a shrinking workforce and rising elderly population, some are suggesting that Japan should lower its expectations and embrace a future of frugality and sustainability.

And, in recognising that the ceaseless quest for growth may not be at the heart of a nation's wellbeing, Japan could offer lessons for other developed economies as they scramble to avoid their own versions of the "lost decade".

Shikataganai, an oft-heard expression here, is a verbal shrug emitted when hopes are dashed by the supremacy of external forces – and that Japan is at the cusp of a transition from economic miracle worker to a less obtrusive participant in global capitalism has a feel of inevitability to it.

Few people believe the current members of the political class that authored Japan's postwar transformation have the wherewithal to conjure yet another miracle. Nor, despite the best intentions of the left-of-centre government, do they appear to believe their future lies in recalibrating foreign policy away from the US and towards the rest of Asia.

On the contrary, relations with China will remain Janus-faced for the foreseeable future. Japan views China as an economic and military rival, but also as a site for its manufacturing plants and, thanks to the rise of a Chinese middle class, a crucial market for the cars and electronics it produces.

While conservatives fret over the pace of China's economic development, and the size of its defence budget, a new voice is emerging: one that asks why a country that spent 250 years in sakoku isolation – a period that saw little economic growth – cannot beat a retreat into a modified version of the past.

It isn't hard to see why such a radical rethink of Japan's economic raison d'etre should at least be debated. The Nikkei stock index is only at about a quarter of its all-time high of 1989; real estate is worth about a quarter of what it was in 1974. While Japan's (reformed) banks dodged the worst of the Lehman shock, the country is displaying the symptoms of a malaise it once dismissed as a western disease: unemployment, the emergence of the "working poor", a widening income gap, and the ignominious spectacle of a corporate icon, Toyota, called to account for shoddy workmanship in the committee rooms of the US Congress.

It is easy to overstate Japan's sense of disquiet, but even optimists accept that the certainties of the postwar period are creaking under the strain of economic realities. Graduates are no longer guaranteed lifetime employment with major companies and, even if they were, fewer are willing to submit to the work ethic expected of their baby-boomer fathers.

The previous generation endured commutes on packed trains, long working hours, few holidays and a cramped existence in the soulless suburbs. Employers' expectations have changed little, but the old quid pro quo – that workers will see their standard of living improve – no longer applies.

While the postwar generation worked at a time of population growth and rising wages, the young workers of today have only ever known weak consumption, falling prices and contraction.

Japan's skewed demographics will only lend weight to the view that its people will have to recalibrate their expectations. Government figures estimate that the population, now at 127 million, could fall by about 40 million by 2050, when almost 40% of the population will be aged 65 or older.

Japan depends heavily on Middle East oil and imports around 50% of its food, but its comparatively homogeneous society has never shown much enthusiasm for similarly impressive influxes of foreign labour, despite warnings that it will need to accept 10 million immigrant workers over the next half -century to keep its economy ticking over.

There is little sign now, however, soon after Japan's parliament approved yet another stimulus package, that policy-makers are about to accept the case for sustainability over growth.

Two decades ago, a group of economists predicted that 2010 would be the year that Japan finally overtook the US as the world's biggest economy. How long will it be before bets are being taken on when it becomes the first economy to shake off its addiction to growth and give other mature economies a glimpse into a more frugal future?

No change here



What's striking about the images in photographer Michael Wolf's new book Tokyo Compression, aside from the lengths to which people will go to wedge themselves into a bulging carriage, must be the looks of resignation among the victims. But it is the ability to tolerate an elbow in the back and a cheek pasted against a window that sets Tokyo's commuters apart.

There are few arguments: it's as if the powerless, massed ranks of the travelling public have entered into a non-aggression pact.