BOOK REVIEW / NONFICTION : Making Sense of Japanese Politics, Business : THE END OF JAPAN INC.: And How the New Japan Will Look <i> by Christopher Wood</i> ; Simon & Schuster $23, 240 pages

Not so long ago, Japan was regarded with a mixture of awe, envy and fear by Americans, and the Japanese model of corporate management became something of a cult in American business circles.

We watched with despair as Japanese investors collected some of the icons of American popular and corporate culture, everything from Universal Studios to Rockefeller Center.

The buying spree, argues Christopher Wood in “The End of Japan Inc.,” was a folie de grandeur , and now Japan is paying the real price of its arrogance and folly. “The bubble economy” of Japan has burst, Wood explains, and no one quite knows what will come next.

“What is at stake here is no cyclical blip but a sea of change in the way an entire society is run,” Wood insists. “Radical change is coming, and it will come fast.”

According to Wood, Japan is facing its “most severe economic crisis since the American occupation.” The old magic--a kind of financial alchemy based on “export-driven pursuit of market share in global markets, heavy capital spending, and the deliberate suppression of consumer demand”--no longer works.

Wood is a former correspondent for “The Economist,” and nowadays he’s working as an investment banker in London. The blend (or clash) of these two sensibilities--journalist and “investment strategist”--create a savvy and sometimes impertinent tone.

For example, when Wood explains how matters of money and markets are controlled by politics in Japan, he pauses to tell us that Bank of Japan is chartered under a 1942 statute that was copied from the Nazi Reichsbank law.

“The Nazis did not believe in independent central banks,” Wood explains. “So when the chips are down the far more politically aware Finance Ministry has the power to tell the Bank of Japan what to do.”

Wood writes knowingly of the political origins of the Japanese economic miracle, including the recruitment of a former war criminal to lead an American-sponsored government in the years after World War II.

He argues that the “Hollywood culture only goes skin-deep in Japan,” and the Japanese ideal remains “a spirit of enlightened feudalism.”

And the fall of the Liberal Democratic Party, he insists, was nothing less than “the collapse of a ruling order.”

Wood does not engage in Japan-bashing, but he is not shy about saying out loud what he thinks about the strengths and weaknesses of Japanese culture.

Japan’s loss of leadership in the market for computers and other high technology products, he says, is explained by “Japan’s national traits of social conformity and suppression from an early age of all forms of individualism.”

“It has raised basic questions about whether the traditional Japanese education system, with its emphasis on rote learning in contrast to the Western liberal arts tradition of cultivating critical judgment and an inquiring mind, are really the skills best suited to the needs of serving an information society.”

What will take the place of Japan’s failed policies as it hurtles toward the 21st Century?

Japan itself is being shaken by profound social, financial and political upheaval, and there is no sure way to know what the landscape will look like when the dust settles.

“Japan clearly works best as a society when there is an agreed consensus,” Wood concludes. “But sometimes a consensus is not possible. This is the new reality that now faces Japan.”

But Wood himself suggests that there is a right way and a wrong way to solve the economic problems of Japan Inc.

Japan faces a choice between two paths to economic recovery--one is the rough-and-tumble of what he calls “the Anglo-Saxon free-market way”; the other is “a panoply of controls and subsidies in the aim of defending the status quo whatever the cost in terms of subsidizing inefficiency.”

“The End of Japan Inc.” is a book by a specialist for a sophisticated readership.

Wood names names, crunches numbers, and slips in and out of government ministries and corporate boardrooms with the deftness of a true insider. But, to his credit, Wood manages to make sense of the dismal science of economics and the sometimes abstruse workings of Japanese culture, politics and enterprise.