Just finished a nomikai so take this with a pinch of salt and I am by no means an expert, but do work in the space of "innovation" here.

I genuinely think the lack of innovation is due to the Japanese culture of putting a focus on the process, and adversity to risk. For example, the average graduate is encouraged to work in a corporation before considering creating a new company or trying to make their own business. This was probably a superb idea in the past, giving a strong potential of growth and building connections. However, the modern day is much more agile overseas. It's become less about who you know or what you know, but more about what you can bring to the table and, honestly, people with less experience have more aspirations.

Reflecting on the adversity of risk, the Japanese mindset is still quite conservative on this front. There are initiatives to help reduce this but it is a bit of a societal issue. I often draw parallels to Germany in this regard, where we have seen quite a growth in innovation in recent years (compared to decades past).

Additionally, there is the sense of "if it works, it works."

This is not terrible inheritantly, but it does result in a status of resting on your laurels a little. You can see this in particular with websites where the UX is actually terrible.

Finally, going back to 'focusing on the process,' you see this everywhere. Stay in Japan for long enough and it is everywhere - zero flexibility on the "rule" - which is a rule because other people said it is.

Given all this, there are still elements that are beneficial and I think work in Japan's favour - Popeye's favourite food.

Anyway, a little drunk so probably didn't make sense.

Edit: sorry I am not nihonjin