Even during the deepest point of the post-1980s recession, unemployment never exceeded 6%. In fact, the highest level of unemployment Japan has experienced since 1953 was 5.6%: http://www.tradingeconomics.com/japan/unemployment-rate
It is interesting that they managed to preserve low unemployment and increase the standard of living during about 20 years of flat economic growth, but they've done it. Part of it can be explained by the fact that layoffs are rare (companies almost always assign employees to do unnecessary work rather than lay them off), but that is not sufficient to explain how Japan maintained the world's second-highest GDP during the "lost decade."
Japanese GDP (PPP) per capita is only about 70% of US GDP per capita. If they have the world's second-highest GDP, that is mostly because they have the developed world's second-highest population.
Some argue that Japan fudged its numbers to hide the drop in GDP following the crisis, and was waiting for reality to catch up whilst reporting stagnation for a few years.
Depends on your definition of credible evidence, and your personal theoretical bias, as with most things in economics (see: China bull vs bear case).
My position on the matter is "I don't know, and I'm unwilling to invest the effort to know"; the extent of my interest in Japan is how the ever lowering JPYSGD makes for good value holidays. But it was an interesting theory worth chucking in.
I've also seen some interesting playing around the components of CPI in Japan and elsewhere, taking them in and out of the index as required to obtain the right result. Can't find a link, unfortunately; it was probably a paid bank research report and I've been out of the field for half a decade.
It is interesting that they managed to preserve low unemployment and increase the standard of living during about 20 years of flat economic growth, but they've done it. Part of it can be explained by the fact that layoffs are rare (companies almost always assign employees to do unnecessary work rather than lay them off), but that is not sufficient to explain how Japan maintained the world's second-highest GDP during the "lost decade."