But while investors are getting increasingly accustomed to the notion of a secular decline in Japan’s economic might, it is the relative underperformance of Asia’s many developing countries that’s truly surprising them. Outside of China, growth in East Asia has averaged 5 percent over the past three years, which is well below the global emerging-market average of 6.5 percent and a distant cry from the 8 to 9 percent growth rates that were commonplace in many of these countries before the Asian financial crisis in 1997-98. From South Korea to Thailand, domestic demand in much of the region has been rather moribund during the current global expansion.

Popular talk revolves around how Asia is decoupling from the United States in economic terms. But the “Asia is coming into its own” construct is undermined by the lack of significant domestic demand drivers in the erstwhile East Asian tigers. To be sure, the share of exports headed to the United States from these economies has been reduced in recent years, but only to be redirected to China, leaving them as dependent as ever on export-led growth.

Following the Asian financial crisis, many of the countries in the region focused on fortifying themselves against any external shock by building up massive foreign-exchange reserves and running large current-account surpluses. But in doing so, they seem to have forgotten what it takes to be growth stars. Companies and consumers in economies from Taiwan to Malaysia have been keen to pay down debt and stay away from any form of leverage, resulting in record-low loan-deposit ratios in the banking system. Historically, in strong growth phases, loan growth usually increases as people feel more inclined to borrow and banks become more willing to lend, signaling higher confidence.

While the deep psychological scars from the East Asian crisis have been an important reason for keeping a lid on domestic demand, policy sclerosis and the inability to reinvent economic models have also played major roles in undermining growth prospects. Indonesia, for example, should aim to grow 8 to 9 percent in the current global environment, given its large exposure to commodities and a low per capita income of $1,700 that provides ample scope for “catch-up.” Instead, its growth rate has barely averaged 6 percent during the past few years, with the government balking at carrying out key reforms—particularly in the labor sector, where highly restrictive laws result in only one of every three Indonesians holding a full-time job.

Malaysia hasn’t fully capitalized on strong global growth, either, despite its exports exceeding the size of its economy. Malaysia continues to mainly manufacture electronic goods that are now increasingly produced in lower-cost countries, such as China and Vietnam. Meanwhile, the larger and more advanced economies of Korea and Taiwan have been unable to shift to a service-sector-oriented model that would have allowed them to grow at a faster rate. Admittedly, Singapore has had some success by aggressively pushing growth in the financial-services sector. But with an economy only $130 billion in size, there’s a limit to how much Singapore can change Asia’s fortunes.

With the exception of China and India, then, the other large to midsize economies of Asia are acting as a drag on the continent’s growth. Meanwhile, the newly emerging markets of Eastern Europe, Middle East, Africa and even parts of Latin America are expanding at above 5 percent. And Europe and the United States are continuing to outpace Japan The result is a growth story that doesn’t quite live up to the conventional wisdom that this is “Asia’s century.”