That it is a limited ability is indeed true. There is a limited window for learning a language both as a "first" language, and another limited window for picking one up as a naturally fluent second (or beyond) language. Some people have a wider window than others for the second. The first language generally ends around 6 or 7 - as in children without any language exposure and development before that age are never able to pick up a real first language. After puberty, they usually are unable to pick up any functional language at all regardless of effort or time invested.
The window to pick up a naturally fluent second + language tends to narrow and close in the mid teens to late teens. Some people have a longer period, some shorter.
Of course, passing this window doesn`t make it impossible to learn a language or to speak it well. It just puts it into a different space in your brain, making it a bit harder to be natural in your speech.

The biggest way to explain this difference would be amnesia. Languages picked up after the window disappear if you get total amnesia - your first language and others that were acquired during the open window period stick around just like other normal life skills. Otherwise, it is stored with the rest of your knowledge - things that you can lose with time or memory damage.

This, this, and this.
If you connect words directly to their meanings - not as in "ねこ" means "cat" but as in that furry thing over there with a tail and pointy ears is a "ねこ" - they tend to stay in your mind MUCH better. Instead of thinking of something as "how to say something in Japanese" you should file it away as "another word for something". There are countless ways to say something in English and countless items have multiple words for them - people do not have too much trouble linking these words to the items without thinking "Kitty? Oh right, that means cat in my everyday speech!"
There are many things that I know in English, and know in Japanese, but there is no link between the words. I`ll stumble across the words next to each other and there will be this little epiphany. I never knew that *** meant ***! Even though I know both the words, they`re not connected to anything but the meaning itself.

I say all this from first hand experience... I was such a terrible language student. I always wanted to "translate" every stupid little nuance that I had in my English into Japanese. You can't simply try to color another language with your native tongue... for they are completely different primary colors. It's like taking yellow and trying to make red out of it.

Some of this is a bit skewed. Your second language should not take as long as your first because you have a framework of knowledge to build it over. You don`t have to learn what something is, does, what it looks like, etc at the same time as the words. At least not for the majority of things. All you need to do it put a new language set over that knowledge, with some tweaks to account for culture and foreign items.
The problems in Japanese schools (and really in US high schools too regarding second languages...) is that there is very little time dedicated to the language to begin with. You can`t pick up a language in a few hours a week. It doesn`t matter how many years you`ve been studying it.
I WOULD expect a 4th or 5th year learner who has been immersed to be able to read, comprehend, and passably translate pretty much any standard novel tossed in their direction.
I would also expect a 4th or 5th year learner of a first language to be able to understand a book aimed at their level of knowledge and language skill.

I strongly disagree with this one.
Passive exposure is completely different than active exposure. This is why children even in native speaking countries who watch television in their native language, with native language interaction at other times are behind in language skills. Passive exposure alone does NOTHING. In fact, it will hinder more than help. Exposure to a language you do not know enough of to understand becomes background noise. Without interaction and reinforcement there is no progress. This is why people can watch anime for years and years and still have a vocabulary of about 10 Japanese words, half of which they aren`t using properly.

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