I really don't see how one example of an index going down makes all the others a bad investment. Sure the Nikkei is diversified across industries but it's not comparable to international indexes.
That's not the only issue with this reasoning, this index is not a total returns one. And if you had been investing regularly you'd have bought companies at the Lowe price, which has produced a 2-3 times return in the last ten years.
I think the point is that "indexes are overall superior to stock picking, and always go up over long periods of time" is disproved by the history of Nikkei.
Sure, at a given time and place, an index may be better. At other times one or two stocks may be better. But I think the "time in the market beats timing the market, always" is kind of negated by Japan's lost decades.
Still, I also prefer global indexes.