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>Chinese (as opposed to the simpler phonetic characters) are becoming increasingly obscure and few students are getting a solid grasp of them... native Japanese don't "read" them phonetically, they just recognize the symbols, which many young Japanese might not be able to do.

Young as in 5 years old? Because toddler books are literally the *only* place where Japanese is written phonetically instead of with kanji.

If someone with basic education in Japan couldn't read kanji, they would be considered every bit as illiterate as someone in the US who couldn't read the alphabet.

The misconception that they're losing kanji knowledge comes from the fact that they're getting worse at *handwriting* particularly obscure words because of the prevalence of typing, but that's true for everywhere. If someone came up to you on the street and asked you to spell "onomatopoeia" correctly, could you? Probably not, but that doesn't mean you can't read your own language.