In 1979, Professor Vogel shocked the world with the bold title of his book: 

It was a shock, because Japan was exporting cars like this at the time: 

A few years later, the Japanese car makers brought US car makers to their knees – to the degree that Chrysler received its first government bailout in the early 1980s. When the US car industry was threatened by the popularity of cheaper more fuel efficient Japanese cars, the US government threatened car tariffs in 1981. As Japanese manufacturing productivity exploded across all manufacturing sectors, so did its exports, and soon Ezra Vogel's book became the book to read in the 1980s. 

Alas, Japan never became number 1 – and just a few days ago it lost its number 2 status, as China advanced to become the second largest global economy. The Economist points out, however, that the Chinese rise is less about China than about the Japanese decline: 

WHEN China's economy was announced as the world's second-largest earlier this week, the news was spun as a China story, or occasionally as a story about the Chinese challenge to America. But the data that triggered the announcement were Japanese, and China's rapid catch-up to the Japan says as much about the latter economy as the former. 

Five years ago China’s economy was half as big as Japan’s. This year it will probably be bigger (see chart 1). Quarterly figures announced this week showed that China had overtaken its ancient rival. It had previously done so only in the quarter before Christmas, when Chinese GDP is always seasonally high. Since China’s population is ten times greater than Japan’s, this moment always seemed destined to arrive. But it is surprising how quickly it came. For Japan, which only two decades ago aspired to be number one, the slip to third place is a gloomy milestone. Yet worse may follow. Many of the features of Japanese capitalism that contributed to its long malaise still persist: the country is lucky if its economy grows by 1% a year. Although Japan has made substantial reforms in corporate governance, financial openness and deregulation, they are far from enough. Unless dramatic changes take place, Japan may suffer a third lost decade.

Read the entire piece. It's largely about the structural problems in the Japanese economy, and especially in Japan's corporate sector. But one shouldn't overlook the chilling effect of years of deflation.