Four children in the usual uniform: the two girls in blouses with sailor collars and the two boys in militaristic black suits, a style originally inspired by the Prussian army.

They are aged 12 to 14 but look, to English eyes, much younger. They are paralysingly shy, and puzzled by my questions. What pop music do they like? A few Japanese names and Michael Jackson. Nirvana? Take That? Never heard of them. What do they think of the Japanese royal family? Nobody had ever asked them that before. Are they supposed to think about the Japanese royal family?

Then I try: how does it feel to live in Japan, most admired and envied of nations? Tomomi Abe, 12, looks thoughtful. Well, she says, when I watch television about Cambodia or people in Arabic countries, when I see this, I feel: I am lucky to live in Japan.

Tsushima, Hiroshima, or March 1945 when B29s flattened Tokyo mean little to Tomomi. She knows only Japan as it is now, the most dynamic economic force in the modern world, a peace-obsessed nation with almost crime-free streets where eight-year-olds travel home from school alone on the subway through central Tokyo, where the streets are clean, shop assistants are polite and railway stations compete with each other to provide passengers with the most delicious lunch boxes. Hardly surprising that Tomomi feels lucky; she lives in paradise.

Oh sure, there are the famous little inconveniences. There is no room to do anything properly, so most Japanese have to put up with weirdly condensed versions of things - golf played in driving ranges whose netting shrouds litter the Tokyo suburbs; skiing down a massive steel tube; or baseball played, preferably when drunk, against robot pitchers on a range somehow hewn out of the bars, restaurants and strip joints of Shinjuku. Plus, if they want to live within commuting distance of work, they have to put up with electric rabbit hutches - tiny apartments or houses full of redundant remote control units (the gadgets are all within arm's reach). Plus, even if you earn The Mighty Yen, this place is expensive. The meter on a Tokyo taxi starts running at pounds 4, Bullet Train prices make British Rail look reasonable and custom more or less demands that a man on a salary of 7m yen (pounds 45,000) will spend that much on his daughter's wedding - 400,000 yen (pounds 2,600) on the kimono alone.

Never mind, these are little things. It's still paradise. Isn't it?

In the yakitori bar, drunk air-conditioning engineers are thwacking a girl who is with them over the head, quite hard. She winces, makes a show of leaving, laughs and comes back for more. Don't have anything to do with Japanese girls, one of them advises me, they're all like this] Disgusting]

The office ladies click neatly to and from work, high heels, trim little suits, heartbreakingly slender, male fantasies of correct and decorative compliance. More of them in the department stores and hotels, this time in uniforms. In spite of the flashing lights and opening doors, they must show you which lift you must take. As the doors close, they bow deeply, white-gloved hands clutched in front of their thighs.

OK, I like it, but . . . I could evoke many such uneasy images. To the Western eye the Japanese paradise can seem to rest on unacceptable, if not positively rotten, foundations. Most obviously, women are condemned to be the second sex. But look deeper and there is also endemic corruption in government, a passive, complicitous press, a rooted xenophobia - Koreans are especially disliked - a suffocating conformity, and wilful subjugation to the whims of big business.

Angered by all this, the jaundiced Westerner may conclude that Japanese economic success is a freak. Consumer electronics and cars have provided this super-corporatist, anti-individualistic state with a temporary supremacy. But the chickens are coming home to roost: overmanning, an inflexible workforce, the urgent need to distribute manufacturing jobs to cheaper centres of production, a boneheadedly rigid education system that becomes progressively more ineffective as children grow older, and so on. Japan, says the Westerner gleefully, must change.

Oddly enough, the Japanese agree. Government officials with their beautifully oiled helmets of hair queue up to explain that the time has come for radical change. In the education ministry I was told that the school curriculum was being transformed to prompt children to be more creative so that they would grow up and, among other things, write computer software as well as chaotically educated hippie American silicon heads.

In the Agency for Cultural Affairs I was told the Japanese were being encouraged to enjoy life, to appreciate their heritage by taking time off work to visit shrines, temples and museums - though, added the spokesman, they would not, like the French, allow heritage to stand in the way of progress. The Economic Planning Agency wants to persuade the people to work 1,800 hours a year instead of 1,950 so that they may enjoy life. The Foreign Ministry is struggling to make Japan a 'normal country' with a seat on the Security Council and something recognisable as a foreign policy.

Even outside government the clamour that change is on the way is deafening. At Dentsu, the biggest advertising agency in the world and the single most powerful force in the Japanese mass media, they say the hard-working, corporatist, sexist 'Dankai' or baby-boomer generation is giving way to the 'Dolphin' generation. The Dolphins are anti-fashion; they don't want work to dominate their lives; they worry about the environment; they are, you know, relaxed. At Nomura, the biggest financial institution in the world, they say the Japanese, the most abundant, obedient savers on the planet, are going to have to wake up to investment risk, an all but unknown phenomenon for the past 30 years.

So consistent is this tale of impending change that one grows suspicious. People always say that Japan is on the brink of change and, besides, these changes all sound too familiar. They sound as though they are reading from a Western script; this is what we want to hear them say. We want them to become more like us, so that the Oriental future does not seem quite so hopelessly alien.

But this time it may be true, because they are being driven by the novel possibility of economic failure. Across the Sea of Japan there is the thunder of Chinese growth.

'The Americans think they can control China,' said one diplomat, 'or they think we can. But nobody has ever controlled China and nobody ever will.'

Japan, meanwhile, has just entered its fourth year of recession, a record. It follows a period from 1987 to 1989, now known as The Bubble Economy, when growth was 5 per cent and the Dolphin girls bought Armani blouses for 250,000 yen (pounds 1,600). But now the belief that economic success and 'ethical strength' were inevitable partners has begun to crack. People are beginning to undermine the corporate grip by seeking out cheap imports instead of shelling out in the big department stores - companies whose iron grip on consumption has been such that they run private railway systems to make sure commuters pass through their shops.

Meanwhile the big firms are worrying about the burden of the lifetime employment system. Suddenly the massed ranks of salarymen, office ladies and factory workers do not look so secure. Unemployment is still ridiculously low at 3 per cent, but university teachers told me that students no longer slip quite so automatically into waiting jobs.

Taichi Sakaiya is a star. He is always on television and writes dozens of books, all bestsellers, about big, global changes. The Japanese love him because they love being told about themselves. Foreigners, for example, are repeatedly grilled about their impressions of the place: What do you think of Tokyo? Do you like our food? Do you like Japanese girls? Sakaiya feeds this hunger. Looking grand and a touch avuncular in a cool office in Tokyo, he chain-smokes (half of Japan chain-smokes, the other half just smokes heavily) his way through the future and his version of the Big Change.

'Look at Sumo wrestling,' he says. 'Of course, the individual wrestler must win, but he belongs to a stable of 15 or 16 others. He must obey all these customs about diet, hairstyle and things. He is only free to be a wrestler within this hierarchy. But an American boxer fights for himself. He must sell himself to an audience. The business is consumer-led.'

Japan for Sakaiya is 'almost paradise'. Its people are materially successful but don't feel rich; they want to play a part in the world like a 'normal country' but don't know how. And, perhaps most alarming of all, Japan is an industrial monoculture - a success solely because of a genius for mass production. Now the Japanese must change. Mass production will happen elsewhere. Like the West, they will have to learn to trade up, to think quicker, lighter - to be like the dancing boxer, not the lumbering Sumo.

His solutions are close to the ones I heard from others - education reform, more creativity and so on. This is not surprising, he wrote their scripts. Indeed, many of the terms they use are Sakaiya inventions. But he goes further. He knows the real problem.

'We don't have a God who is absolute truth or power, somebody who evaluates your behaviour. So we seek evaluation from others, from the group.'

The group, for most post-war Japanese, is the company. They can think of little else. In the yakitori bar I asked what all the white shirts were talking about. 'Office politics.' Anything else? 'No.' This has got to change, runs the theory, because the heavily rigged, protectionist, company-dominated economy cannot survive. But that's just economics. The underlying demand is that Japanese hearts and minds must change.

For Sakaiya, there is no choice - if the Japanese want to continue as an economic giant, as an ally of the United States and as a parliamentary democracy, they must shake off the corporatist bureaucracy and acquire some Western-style individualism. They must seek their group consolations outside the company - in, he suggests, hobbies, in the rituals of private life like sport. Tribes of baseball followers, he points out, are already part of Japanese life. And, having stood by the netting of those golf ranges late at night, I think I can see that what the Japanese mean by 'hobby' is something more intense, less cosy than train-spotting or DIY.

But is he not asking the Japanese to discard their entire culture? 'No,' he replies, 'Japanese culture has layers. It takes on new things and they become part of the country. That is what Japan is - layers.'

In Kyoto I watched parties of schoolchildren marching in long lines to see the exquisite Ginkakuji Temple. One girl's T-shirt was decorated with English words: 'Have done] Keep off] Because he's yours.' A layer, a Western layer made weirdly Japanese.

Such layers of translated foreign style are everywhere - Prussian uniforms, Italian clothes, American burgers and, from 1,200 years ago, the mannered sophistication and discipline of T'ang China. And it is easy, after a while, to accede to the Sakaiya view that Japan is these layers, understandable only in compacted cross-section.

But Sakaiya omits to mention the screens behind which they hide. In Shinjuku, a safe but sleazy area of Tokyo, the only words I saw in English said 'Japanese Only' and there are mysterious, unsigned restaurants with sliding screen doors. Outside are parked Lexuses, Mercedes, Rolls-Royces, their engines humming and chauffeurs sitting upright, white-gloved hands resting on the steering wheels. You can't get into these places without an introduction and a willingness to spend up to 150,000 yen (pounds 970) on your evening's entertainment. Yakuza (Japan's systematic and respectable gangsters) and politicians are said to be the primary clients.

And, again in Kyoto, I walked late at night through a silent, wealthy area. Narrow lanes coursed between exquisite wooden houses, executed in the local, linear style. High, sculptured bamboo fences and overhanging trees hid them from clear view. But occasionally I could see shadowy movements amid wooden and paper screens and dimly glowing lights. These are not, in fact, houses, they are discreet, private drinking clubs where the rich, powerful and connected go to discuss Japan.

Perhaps in these strange restaurants and clubs the decision really has been that change must come. Or perhaps those men surrounded by their beautiful, smiling, bowing, kneeling women know that the talk of change is just another front, a screen not a layer. I don't know, and they wouldn't tell me if I asked.

The airport bus to Narita crosses the Rainbow Bridge to give a sudden, shattering view of Tokyo spread around the bay. For the first time I experience this city - frenzied and ugly by day, frenzied and beautiful by night - as calm and quietly impressive in the morning haze. One day Tokyo will be superseded, perhaps by Shanghai. But, for the moment, this is still the centre of the modern world, the successor to London and New York, the place you have to go.

In the bay below the bridge there is an enormous cargo ship with the single word 'Toyota' painted on its flank. It is an easy image - more toys being sent to charm the world into feeding the maw of The Mighty Yen. Except that, strangely, the ship is not moving, it is becalmed as if waiting to be told which way to turn, waiting for the word from behind the screens.