After two years in Japan, focusing almost exclusively on Japanese companies as a target market, and now also preparing to move back to the US (for different reasons), this report rings true.
Japan, by and large, does not reward innovation.
This quote sums it up:
"So what do you need to create an environment where innovation and thus knowledge/ creativity thrives? What do you need for a thriving post-industrial economy?
You need a culture that can deal with change. You need companies that are small and agile. You need incentive structures that reward ideas over performance. You need a government that is not stuck in bureaucracy. You need a thriving VC investment climate with Angel Investors that are willing to take risk. You need entrepreneurs that take risk. You need an education system that rocks. And guess what, Japan has none of that [12, 13]."
I'll take exception to the one statement that Japan is not able to deal with change. If you look at the history of Japan, they are probably the only country in the history of the world to go from a medieval society closed off to foreign influence to a global power in less than 75 years. The reasons for this ability are complicated and may only work at the macro level, but it does demonstrate an enormous capability for change.
The article is right, however. If the other factors are not there, the outlook for Japan's entrepreneurial culture is not great in the coming decade.