First of all I have no favor in Japan when it comes to geopolitics, actually quite annoyed by it, but I will comment from pure business angle. News like "China surpasses Japan" is not big deal, it's only a surprise if otherwise! China is a continental sized economy, it's natural to be far larger than an archipalego-sized Japan in macroscopic indicators.
On more comparable base, Japan lost to SK in several major heavy industries, electronics (see that ADB chart, SK already overtakes in HT exports), and lost to Taiwan in semiconductor (TSMC currently controls 60% of the worldwide foundry market and has an annual net profit of around $10 billion). SK, Taiwan, are the real existential problem for them.
Japan onshore (domestic) business may have taken hit from rise of SK, Taiwan, however note that Japan still has massive offshore credits (assets, including HT manufacturing), largest in the world even more than China, that's something too big to miss. Japanese are rich, own their public debt, earnings from global credit offset trade deficits, Japan financially is fine for the time being.
Japan might be doing fine now, however in the long run, Japan will continue to face stiff competition from SK and Taiwan in HT exports. My advice is Japanese HT corps should integrate closer with Mainland in order to maintain their competitiveness, like what SK and Taiwan have done. For Japan, continental-sized China is not a competitor, not a rival, it is a hope.
