Business leaders say doing so is vital, but farmers fear a flood of cheaper imports would ruin them. Analysts say it could be a vehicle for economic revival but also lead to job losses and social dislocation, especially in rural areas.

"Merely unleashing the forces of competition and the free market isn't going to do the trick because people who feel vulnerable will crawl back into whatever they have," said Koichi Nakano, a political science professor at Sophia University in Tokyo.

Nakano and others say sweeping changes are needed in both policy and mindset, from expanding the social safety net to overcoming a deep fear of failure that has constrained entrepreneurship and risk-taking — and Japan's economic potential.

About 77 percent of Japan's jobless aren't getting unemployment benefits, according to International Labor Organization data, in part because temporary workers don't qualify.

Japan can be innovative: It is the world leader in hybrid vehicles and industrial robots. Nintendo's "Wii" gaming console is a hit in living rooms around the world. Entrepreneur Tadashi Yanai, Japan's richest person, built Fast Retailing Co. and its low-cost Uniqlo brand into one of Asia's biggest clothing retailers.

But Japan sometimes undermines itself by being insular. Its sophisticated mobile phone industry, for example, has failed to grow overseas because it operates on a network hardly used anywhere else — earning it the nickname "Galapagos Syndrome."

One optimist is Michael Alfant, an American who has worked in Japan for 20 years. He sees the country becoming more entrepreneurial and focusing on opportunities in service industries.

"Japan is reinventing itself," said Alfant, CEO of Fusion Systems, a startup software company, and the incoming president of the American Chamber of Commerce in Japan. "I'm very confident Japan will get there."

Any change is likely to come gradually.

A conformist, consensus-based culture means Japan is generally slow to make changes or respond to crises — as seen in Toyota Motor Corp.'s handling of its safety woes.

"One would think there would be more of a sense of urgency here," said Jeff Kingston, director of Asian Studies at Temple University's Tokyo campus. "At best, Japan will muddle through, meaning it will avert catastrophe, but it is hard to see anything but bleak prospects in a country that should be doing better given its enormous strengths."

Japan seems destined to follow in the footsteps of former global powers such as France and Britain. That's not necessarily bad, said Sophia's Nakano.

"If you manage the decline reasonably well and turn things around in a different direction," he said, "it's possible to retain some influence and reinvent oneself as a soft power, a relevant player on the world stage."