The Frenchman, who led Japan to the last 16 as co-hosts in 2002, called on coach Takeshi Okada to make wholesale changes after Monday's 2-0 home defeat by South Korea.
"It's a bad situation for Okada," Troussier told Reuters in an interview on Tuesday.
"The situation now is exactly (like it was) when Okada was coach at the World Cup in 1998. The team has exactly the same stupid mentality.
"Okada has confusion in his head. He was blinded by the fact that he wanted to beat Korea.
"Yesterday was an important match to test some players or maybe a new strategy. They conceded an early goal and the players didn't know what to do. They don't have enough information.
Captain Park Ji-sung put Korea in front after six minutes at Saitama Stadium before Park Chu-young wrapped up the win just before the final whistle with a penalty in added time.
"After Korea scored there were 80 minutes left and we didn't see anything from Japan," said Troussier.
"If you have no confidence you can't take risks. You only get confidence if you know the solution."
"Okada wants to play like Spain, like Brazil. You have to be careful, you have to think seriously how to change your philosophy at the highest level."
The 55-year-old, linked with North Korea and Ivory Coast before the World Cup, said Okada needed to consider leaving out playmaker Shunsuke Nakamura in South Africa next month.
"Nakamura is a beautiful player and can win matches for you but you have to protect him," said Troussier, now general manager at Japanese third-tier side FC Ryukyu in Okinawa.
"Nakamura can play at Real Madrid, Barcelona, no problem, because he has some very talented players around him. But if you have Nakamura at (his former Spanish team) Espanyol, no.
"You need defensive abilities and that's not the case with Nakamura. Nakamura is a great player if you have 60 or 70 percent ball possession but that was not the case yesterday.
"It will also not be the case against Cameroon, the Netherlands or Denmark at the World Cup," continued Troussier, who famously axed Nakamura from his 2002 squad.
"(In a band) if I have Jimi Hendrix on guitar I would say don't go off and do a 40-second solo, even if you're the best in the world. Success comes from the collective way."
Troussier, sun-tanned and dressed in a grey suit with a flame-red tie and sitting in front of a bronze Buddha statue at his club's Tokyo office, feared the Japan side had stagnated.
Known as the "white witch doctor" during successful spells in Africa in charge of Nigeria, South Africa and Burkina Faso, he said Japan needed strong leadership from Okada.
"The situation is completely confused," shrugged Troussier, referring to Okada's decision to ask the JFA president if he should continue as coach following
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