Last night the skies opened above Niseko and dumped a perfect carpet of powder on the slopes of Japan's most desirable ski resort. The impossibility of booking a room there, one Tokyo City official told The Times, was an “excruciating humiliation” for his country's economy.

In Niseko at least, the Japanese are no longer the economic masters. Around the slopes, the hotels and lodges are owned by Australians, the pistes are carved by snowboarders from Singapore and Bombay, and the restaurants groan with Russians and Chinese maxing-out credit cards on the exquisite tarabagani crabs.

The official slogans bellow “Welcome to Japan” but the onslaught of foreigners leads many Japanese to a uniquely painful conclusion: that what is, on paper, the world's second-biggest economy has withered to a mere playground for the world's new economic superstars.

It is, some predict nervously, only a short step from investible playground to irrelevant plaything.

Ratcheting up the self-doubt, there are plenty of Japanese who remember clearly when they had the money to turn the top resorts of other nations into their own holiday theme parks; in 1990 a Japanese company paid $1 billion for Pebble Beach Golf Links in California in a deal that marked the absolute pinnacle of the bubble.

They remember, too, the barely disguised contempt with which Japan, as buyer, viewed the seller. Eighteen years later Japanese can scarcely ignore the deepening cracks in their own economy, but can reach no absolute conclusion.

Company incomes soared to record levels in the most recent tax year, Japan ended 2007 atop its longest ever phase of unbroken economic advance since the Second World War and employment continues to grow.

Japan may be a largely exporting economy, but beneath the headline froth of flatscreen televisions and Wii games consoles, its exports are remarkably broad-based and defensive: US recession or not, there are Japanese makers of machine tools, advanced materials, chemicals and electronic components that the rest of the world has not yet learnt to live without. And still the creeping evidence of failure seems ubiquitous.

Some of the signs are the stuff of formal government measures: there was the dismal moment last month when the leading indicator of economic activity slumped to a decade-low of zero. It was followed swiftly by an 80 per cent collapse in housing starts — a supply crisis caused by an ill-administered new law and the single stroke of a bureaucrat's pen.

Some economists believe that the debacle could leave a permanent scar on Japanese GDP growth for years to come.

Glenn Maguire, Asia economist at Société Générale, believes that Japanese corporate expectations of 2 per cent GDP growth for 2008 are too optimistic and that the country is likely to stumble into recession this year.

“Instead, we should consider this 2 per cent level of growth suggested by the Tankan [survey of corporate sentiment] as something akin to a ‘buffer' from which a whole range of exogenous shocks will detract in the coming two quarters.”

Just as convincing as the economists' charts are the wildly diverse anecdotes of Japanese decay: the bankruptcy of a town famous for its melons, the national shoplifting spree among destitute elderly retirees, the boom in sales of hot water bottles by those too hard-up to pay for oil heaters in winter.

The investment conclusion, say veteran fund managers, is accordingly complex. The Japanese economy has been alternately talked-up and written- off with thudding regularity since the 1980s' bubble burst. Predictions of Japan's looming irrelevance are equally well-worn. What is new, however, is perhaps a far more troubling observation that, for the first time, there is no person or institution with any serious control over the nation's destiny.

The likeliest candidates have disappointed badly in recent months, particularly so the Bank of Japan (BoJ). This is a central bank, notes Richard Jerram, Macquarie's chief Japan economist, “whose policy has puzzled orthodox economists for 20 years” and has cut interest rates only after Japan's three most recent recessions were in full cry.

For the BoJ to cut rates now would, he argued, be nearly impossible because it would be an admission by Toshihiko Fukui, its governor, that the past two years of policy-making had been in error.

As recently as last November, despite mounting evidence that sub-prime horrors in the United States would prove globally contagious and push a stock market into retreat, Mr Fukui was giving warning that Japan remained at risk from asset bubbles.

When he announced Japan's decision to keep rates on hold on Tuesday, the abject collapse of global markets was brushed aside.

It is hard to imagine that Japan's central bankers gave much thought to the rising global economic risks, Mr Jerram said, given that Tuesday's monetary policy meeting was the shortest held by the BoJ for more than a year.

The Tokyo stock market, too, has ceased to function properly as a window on the economy.

Even the most bearish strategists have begun to admit that a situation in which half the companies in the Nikkei are trading below book value is no longer a valid reflection of earnings potential.

The bureaucracy — once the dependable steering committee for Japan Inc — has also lost its way. Decreasingly incentivised by retirement “golden parachutes” into industry, the ministries have lost touch with the corporations that used to provide the critical pipeline to real world issues and opinion.

Without the business leaders' input, bureaucrats have imposed what Peter Tasker, head of Arcus Investment, described as “Taleban-style” regulation, with hugely destructive effects.

An ancient Japanese proverb — “if you clean the water too much, the fish will die” — has started to trip from the lips of company presidents.

Sitting above all this is Yasuo Fukuda, the elderly Prime Minister and the leader of a party facing its worst political crisis for 50 years.

With full parliamentary control now lost and legislative horse-trading a necessity, Mr Fukuda increasingly looks like the man who ended Japan's great reform era.

When his Economic Minister admitted last week that Japan was no longer a first-class economy, it was said for domestic effect.

For long-term investors, it resonated even more strongly: within the past few years, fund managers say, Japan has gone from being a calm environment for considered stock analysis to a battleground fraught with political risk and emerging market features.

And for many older Japanese, the name “Fukuda” is synonymous with crisis. The last time that Japan felt as dismal as it does today, it was in the throes of the 1973 “oil shock” — a disaster that shone an uncompromising light on every fissure in the Japanese “economic miracle”.

Takeo Fukuda, the Prime Minister's father, was the finance minister charged with Japan's economic resurrection. It took nearly a decade to achieve.

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