Japan Takes Over the World/Analysis
The Japanese hypergrowth of the '80s was built on a system of buddy-buddy relationships between various corporations and the government. At the time, this system appeared to be a triumph of modern corporatism, but nowadays, we just call it "crony capitalism". Predictably, this created an unsustainable economy based on loose credit, selling below profit, and *cough* toxic loans. At its peak, property values became massively overinflated, to the point where prime real-estate in Tokyo could sell for more than the entire GDP of smaller countries. Once the bubble popped, the economy stagnated, and Japan entered a "lost decade". Banks became zombie banks, the central bank got its hands stuck in a liquidity trap, and Japanese twenty-somethings faced a fate worse than death: while their fathers had enjoyed lifetime employment at one company, they moved from temp job to temp job, failing to build much in the way of careers. In short, they weren't half as inhuman as the mythos.
Another major factor is the necessity of rebuilding all the infrastructure after WWII. While a burden in the 1950s and 60s, by the 70s the Japanese economy was enjoying the benefits of much newer, more modern factories than the United States. (A similar situation happened in Europe, of course, but the Cold War was more of a factor there.) Also, the West put quite a bit of investment into the reconstruction of post-war Japan, particularly during allied-occupation and the decades that followed. They also got help from several of the men who'd been responsible for researching major means of improving manufacturing efficiency during World War II. The American automakers didn't want to have anything to do with them, so they went to Japan. This was how Japan was able to make cars that were both more reliable and cheaper than the Americans.
Plus, as a bonus, the lucky ol' Japanese government doesn't have to worry spend as much on defense as it normally would with China, Russia, and North Korea so close by - and thus can pump a lot more money into public works and government subsidization of business.