1) Yes, the economy is stagnant. But it's interesting to think about it from the point of view that Japan disproves the idea that a growth economy is the only way. Here is a country that increases worker efficiency and has a really high standard of living, but doesn't do it in a hyper growth kind of way.
2) Yes, Japan is super, super xenophobic compared to other countries. This is contrasted with it being one of the top tourist destinations on earth. I think things like digital nomad visa could be a small step on the way to closing this dichotomy. It's clear that one of the easy levers Japan could pull to alleviate their economic issues would be to allow more immigration, and I think the world's facination with Japan and Japanese culture is such that they could pull it off.