Keep in mind that this article was written right before the earthquake/tsunami. I read this article when it came out and it seemed plausible to me at the time. One big reason is that Japanese people are not the 'toot my own horn' type and if they were doing quite well, they would probably just tell you that they're only getting by. Not in an attempt to fool you, but because it isn't respected to speak about yourself that way.
Of course, there are also a lot of problems in Japan as well. The demographics are not great (in my town they will pay you a subsidy if you have kids), the younger generation is doing a lot more temp work and doesn't have the security that their parents had, and people are showing frustration toward politicians in ways they haven't before. The rural parts of Japan have seen decline as younger people wish to move to the city. I have a friend out in the country who says that half of the buildings in his town are empty and will never be filled again. I think many places in the world are facing these kinds of pressures though.
I live in a nice part of tokyo so I can't speak for all of Japan but I find the living conditions to be quite nice. It is young, energetic, and lively. Everyone talks about how much debt Japan has but at least they use it to build nice things. The train system is absolutely amazing. Everything is earthquake-proof and bolted down. They have been working on the road by my house for almost six years and when you realize what they are doing it's quite amazing. They're putting several lanes of traffic underground (boston big-dig style) and while the total work is slow, everyday there is activity, traffic is rerouted, people are moving things around, and the quality of work is absolutely stunning.
I am always shocked by stores that sell services that I can't imagine being profitable. A small shop selling house slippers. A store selling tatami mats. A little gift shop. I don't really understand how they stay in business but here they are. It's one of the biggest metropolis areas in the world and it still has a small-town feel. I still can't say I understand it all.
Overall, I think viewing Japan through a western lens can be hard. I would be pretty suspicious of any foreign reporting on the state of the country just because the measuring stick will be different. You could say that there were 'lost decades' in that it is obvious that Japan will not be leading the world economies the way they were in the past. However, as an island nation, I don't think there is much sense of disappointment that they haven't expanded their economic reach. I think the people here seem pretty satisfied with the slow growth they have seen. I think when Japanese people dream of success, they want to be well known and respected in Japan. I think playing on the world stage is less of a concern.
But then again, I don't know. My view on all of this changes all the time. Macroeconomics are complex so the lessons learned from one country don't always apply to another.