The Japanese are better at copying than creating, or so the theory goes. Even when they open a "new" market, say their detractors, they simply move into a sector that the Europeans neglected or abandoned. Take Mazda's exploitation of the roadster market after MG cleared out.

While it may be true that the Japanese did not reinvent the car during their rise of the past 20 years or so, it is equally true that they perfected it. The Japanese gave us the assumption of mechanical reliability, arguably the greatest advance of the lot. Before then, every long journey involved a bit of finger crossing. In the process, they forced the West to produce cars expertly and, just as important, consistently. They also made cars much cheaper to produce Today, whether you buy a Fiat or Ford, Rover or Renault, Volvo or Volkswagen, you will be unlucky not to get a car that starts first time, gets you home every time, and can seamlessly motor across Europe at holiday time. Cars, as appliances, have never been better or cheaper.

Which, perversely, is bad news for the Japanese. Suddenly, Japanese cars have lost the main reason for their popularity. European and American cars are now, to all intents and purposes, as reliable and as well made. And, thanks to the soaring yen, cheaper to make and to sell. The result - although there are other reasons for their difficulties - is that the Japanese motor industry looks vulnerable. But now that progress has halted, the Japanese are floundering.

Nissan, Japan's number two maker, is rumoured to be making another 7,000 people redundant not long after trimming staff by 5,000, and the closure of one of its plants. Mazda is in desperate financial straits. Industry analysts think a takeover by Ford, which already owns 25 per cent of the company, is likely. Daihatsu is likely to be swallowed by Toyota, one of the few Japanese makers still doing well.

The Japanese car makers are overmanned and are hamstrung by high costs. Most of the overmanning is in the white-collar sector, as part of Japanese society's commitment to jobs for all and jobs for life. But, as a senior executive from a Japanese company said recently: "Japan has to decide whether it can afford such extravagance in an increasingly difficult world market, or whether it has to follow Western-style market-force capitalism, which would have a profound effect on Japanese society. I think it will have to follow the rest of the world to stay competitive."

The rise and rise of the yen is the fundamental problem. How can any country's car industry - even one as well developed as the Japanese - not be affected by a 21 per cent appreciation of its currency, compared with sterling, over the past two years? Equally, the Japanese invested massively following the booming Eighties. Now the bubble has burst, they - more than the Americans or the Europeans - are paying the penalty.

Yet there is another, more subtle, problem which affects all Japanese car plants, whether they be in Japan, America or in Toyota's soon-to- be-expanded factory in Derby. Namely: now that everyone builds reliable cars efficiently, Westerners are increasingly buying cars for emotional reasons, rather as they buy clothes. Now that cars, like clothes, fulfil all basic requirements, so colour, style, labels and image matter more and more. Unfortunately for the Japanese, the Europeans have always been better at serving up emotion.

European cars are still, by and large, prettier, sassier and more avant- garde. They use better quality materials in the cabins and have more image than their Japanese equivalents. They are toys, not simply tools.

The main reason that no British-made Japanese cars have ever sold as well as expected is because of their poor street cred. Toyota Carina Es look boring. The dull-looking Nissan Primera has been no more successful at muscling into the Mondeo/Cavalier market than the Carina E. The Micra looks too much like a Noddy car seriously to attract the women who were supposed to like its "friendly" face. And the Honda Accord is one of the rarest sights on British roads. You might as well buy a Rover 600 - the same car wrapped in more appealing clothes.

Further upmarket, the challenge is even more difficult for the Japanese. Big, expensive Japanese coups have never sold well in Europe, such is the extra cachet of the Porsche or Jaguar badges. The same is true of big, luxury cars. Not even the undoubted mechanical excellence of Toyota's Lexus LS400 has swayed Europeans from buying Mercedes or BMWs instead.

There are other challenges ahead for the Japanese. Their safety net, a massively loyal home market, is likely to be filled with holes as Japanese buyers become more promiscuous and as European and American cars become better value. Sales of imports rose 40 per cent last year in Japan. Plus: Korea and other emerging carbuilding nations are increasingly able to serve up dependable cars much more cheaply.

At the recent Geneva show, the Europeans were in an ebullient mood, partly owing to the discomfort of the Japanese. "There will be a shake- up, there will be some pain, and there may even be some casualties," commented one European executive. "But Japan will be back. We all know that. Still, who can blame us for celebrating after the lean times we've had?"

The strength of the Japanese recovery, whenever it happens, depends on their ability to innovate. The true mettle of their car makers is about to be tested, as never before.

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