(FORTUNE Magazine) – WELCOME TO the world's preeminent automobile exposition -- the biennial Tokyo Motor Show, recently playing at a vast new hotel and convention complex slightly to the east of Tokyo Disneyland. On press day, cheek by jowl with camera-toting Japanese journalists, came top American and European auto executives -- including President Lloyd Reuss of General Motors, President Philip Benton Jr. of Ford, Chairman Carl Hahn of Volkswagen, and Peugeot's President-Directeur General Jacques Calvet. Some 50 GM executives and engineers from Detroit were on hand, several carrying cameras themselves for use in evaluating the competition. What was the attraction? Despite a worldwide recession in auto sales, Japanese automakers continue to disgorge new models the way a cornucopia spills out squash. They displayed some 181 cars, many never seen in public before. Toyota alone showed 46 cars, 12 more than GM, Ford, and Chrysler combined. Besides the usual far-out concept vehicles and minicars suitable only for narrow Japanese streets, a half-dozen models were unveiled that are headed directly for U.S. showrooms. Three belong to Mazda, No. 4 in sales among Japanese automakers: the RX-7, a snaky $30,000 two-seat sports car; the 626, a mainstream midsize sedan; and the MX-6, a sports coupe variation of the 626. BACK IN 1989, the Tokyo show emitted a fin de siecle whiff of conspicuous consumption: It teemed with expensive machines, high-performance engines, and elaborate electronic gadgetry. This year's event had a mellower feeling, emphasizing sensible, environmentally conscious cars. ''Discovering a New Relationship: Man, Car, and Earth as One'' was the show's theme, and most manufacturers adopted slogans with similar sentiments. Nissan, for instance, changed its company motto for the event from ''Feel the Beat'' to ''Life Together Nissan'' -- reflecting, in the words of President Yutaka Kume, 70, ''an enormous depth of feeling for people, society, and the earth we all inhabit.'' His company -- Japan's second-largest automaker -- went so far as to show the Cocoon, a station wagon concept with modular seating for six. ''As a harbinger of more closely knit families of the future,'' said the brochure, the Cocoon ''provides personal space for individuals and promotes communication among passengers.'' Welcome to Marin County, Kume-san. Some things haven't changed, though: Compared with its rival shows in Frankfurt, Paris, New York, Detroit, and elsewhere, Tokyo still has the most elaborate productions, the biggest video screens, the loudest music, and the greatest number of high-thigh bathing-suit clad models. From the lavish display, you would scarcely guess that Japanese automakers are enduring their first domestic slump since 1984. So far this year, passenger-car sales are off 6.6% in Japan, vs. 12% in the U.S. An economic slowdown caused most of the falloff, and stricter enforcement of a rule in crowded Tokyo hasn't helped: Buyers must prove they own a parking space before they can register a car. More worrisome to the Japanese auto industry than the decline in sales at home is the rising international temperature created by trade friction. Japanese automakers are still squabbling with the European Community over whether the voluntary limit of 16% on 1999 car sales (vs. 13% now) includes cars built in Europe as well as imports from Japan. No anti-Japanese remark by Chrysler Chairman Lee Iacocca goes unnoticed, and the Japanese manufacturers are bracing for the next American protectionist thrust -- whether it's a tighter lid on overall sales or tougher domestic content requirements for Japanese cars made in the U.S. The automakers remain unrepentant about the popularity of their products with Americans, who now buy Japanese cars nearly 35% of the time (if you count Japanese-made, U.S.-branded products such as the Dodge Colt, made by Mitsubishi). In an October speech to the Japan Society in New York City, Toyota President Shoichiro Toyoda, 66, blamed ''insufficient understanding'' on the part of Americans for the view that Japan is protectionist, and added that this U.S. failure was creating ''harsh attitudes'' toward Japan. Between now and the 1995 model year, Japanese automakers are expected to launch 120 new kinds of cars and trucks in the U.S. (vs. a total of 123 from GM, Ford, and Chrysler). Though they are notoriously closemouthed, what they displayed in Tokyo should help map the roads they will be traveling: -- Going upscale pays. Only too well do the Japanese understand that large luxury cars can generate gross profits of up to $9,000 a unit, vs. $500 for subcompacts. Toyota, Japan's No. 1, showed off a highly styled, high- performance V-6-powered Aristo sedan that would slot neatly into the awesomely successful Lexus line at around $33,000. Nissan unveiled a new Infiniti J30 sedan that goes on sale in the U.S. next spring for about $35,000. And Honda displayed an all-aluminum concept car, the FS-X, with a 3.5-liter engine -- Honda's biggest ever. A version of it could wind up in the U.S. as a $45,000 top-of-the-line Acura Legend. -- Design standards are higher: Japanese cars don't look like Japanese cars anymore. New models have organically shaped, sinuously curved bodies; interiors display refined textures and superior ergonomics. Subaru, which traditionally has emphasized function over form, showed several concept cars that would turn heads in Milan. The Rioma, a two-seat roadster, combines the voluptuousness of a vintage Packard with up-to-the-moment technical features, such as four-wheel drive and an engine that can run on methanol or gasoline. -- Fuel economy is in. At $1.14 a gallon in the U.S., gasoline costs less than almost any other liquid you can buy, including Evian. In Japan each drop of oil is imported, and drivers pay $4 a gallon. Americans have been buying bigger, thirstier cars since the last gas lines disappeared in 1979, but Japanese manufacturers are fiddling with every imaginable component to reduce fuel consumption: lightweight materials, body and frame modifications, changes to the transmission and wheels, and exotic power plants. Some Japanese designs aim for all-around ecological correctness: They are mostly smaller (to reduce traffic congestion), weigh less (to conserve resources), produce fewer noxious emissions, include more safety gear (air bags in the side doors and rear seats), and contain additional recyclable parts. While Honda's all-aluminum EP-X doesn't approach the 100 miles per gallon that was widely reported, independent engineers estimate that it gets around 70 mpg. Its VTEC-E engine is already available in 1992 Civic models, but the EP-X remains a concept car: The passenger sits behind the driver rather than abreast, and with a honeycomb frame it weighs 1,368 pounds -- less than half as much as a Honda Accord. -- Electric cars are out. Battery-powered autos got lots of attention at the big international show in Frankfurt this September, but they attracted little notice in Tokyo. Only a handful were on display, and most were consigned to a small tent outside the main hall. Their status as supporting players reflects a growing feeling that they are destined for limited uses, such as in-city commercial deliveries. Even high-tech batteries still weigh too much to power more versatile vehicles. Mercedes-Benz engineers estimate that pound for pound, old-style lead-acid batteries are only 15% more powerful than they were 86 years ago. GM promises to market an electric car by the mid-Nineties. It didn't show one in Tokyo, though it is designing the car so that it can be built with the steering wheel on the right (or Japanese) side. Eight other GM models that are for sale in Japan, including three Cadillacs, were displayed -- all with U.S.-style left-hand drive. According to GM's Reuss, Japanese sales will have to rise significantly above the current level (10,000 in 1991) to make production of right-hand-drive models economical. New designs from European producers included a pair of high-horsepower supercars that already look out-of-date -- both environmentally and financially. Jaguar, now a subsidiary of Ford, showed the frighteningly large XJ220, which has been tested at 212 mph; the company hopes to sell 350 units in Europe only at about $700,000 apiece. Audi displayed the 509-horsepower, 12-cylinder Avus Quattro as a concept car. Over the next few years U.S. buyers will be hearing more from Japanese automakers about cars that are socially and environmentally responsible. Though U.S. motorists are demonstrably willing to pay for safety in the form of air bags and antilock brakes, they have shown little inclination to accept the higher prices and reduced driveability required by cars that limit traffic congestion, air pollution, resource depletion, and so on. Says Nissan's Kume: ''I have some doubt whether anybody can be motivated to buy environmentally sensitive vehicles.'' But the world is heading in that direction. In October, nine New England and Middle Atlantic states and the District of Columbia moved toward joining smog- plagued California in devising stricter emissions limits for new cars over the next decade. Japanese and European producers have taken the environmentalist trend to heart. Based on what they saw in Tokyo, U.S. automakers will want to think seriously about following suit lest they cede another advantage to their overseas competitors.