PICTURE an iron castle in a ruined garden, where a lonely poet sits in a bare, round room, writing about another lonely poet in a bare, round room, who is writing about another lonely poet … and so on. David Peace draws on this image in Patient X: The Case-Book of Ryunosuke Akutagawa, which he calls “a novel of tales” about the eponymous short-story writer. Akutagawa was a major figure in the Japanese literature of the early 20th century whose tormented personal pathology led to his suicide in 1927 at the age of 35.

Towards the end of the book, and of his life, the author (or Peace’s phantasmic idea of him) describes his recurring nightmare about a recursive chain of isolated, imprisoned writers. But the vision itself comes from a prose-poem called A Dream, by Jorge Luis Borges. A fellow fabulist working only in the short form, Borges was a big admirer of Akutagawa. He contributed the preface to an Argentine edition of Kappa, one of the latter’s last and longest stories – a folkloric satire on Taisho-era Japan, in the vein of Gulliver’s Travels.

“Thackeray declared that to think about Swift is to think about the collapse of empire,” wrote Borges. “A similar process of vast disintegration and pain operates in Akutagawa’s last works …” Peace was haunted by that thought while writing Patient X.

“The collapse of empires never seems to end,” he says today. “Thus condemning us all to our circular cells.” To Peace’s mind, Akutagawa belongs among the great obsessive writers – Borges, Poe, Kafka, Dostoevsky. All men who have come to occupy their own mythological space, who might almost have conjured each other while working in self-imposed confinement. As a novelist, Peace himself has tended to create characters who operate at a heightened pitch of psychological intensity. Corrupt cops and tabloid hacks in 1970s Yorkshire. Mass murderers and their victims in post-war Tokyo. Fictionalised portraits of renegade football managers Brian Clough and Bill Shankly. As this book is published, Peace has already heard early readers assume that he was drawn to Akutagawa because of “my fixation on mental instability.

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“Perhaps it’s naivety or blindness, but I hadn’t thought of it like that. I would admit, though, to an interest in people and places at times of defeat. That defeat might be public or private. Yorkshire during the Ripper years, or Tokyo after it’s been bombed flat, or Bill Shankly in retirement [as rendered in Peace’s 2015 novel Red or Dead].

“To put it simply, I’m interested in the way people respond to difficult situations. And it might seem like a big shift to write one book about Shankly and the next about Akutagawa, but what binds them, I would say, is their dedication. What I really respond to in any artist or individual is the level of commitment that pushes them to the limit. I’d also say that if you’re not obsessed with your own work then there’s no chance anyone else will be.”

Peace is speaking via Skype from Tokyo, his home for the best part of 25 years now. He left his native Leeds in 1992, spent a short, unhappy stint as an English teacher in Turkey and moved to a similar job in the Japanese capital. Shopping around for books that might help him understand his new country, he picked up a slim collection of six Akutagawa stories, two of which were familiar from Akira Kurosawa’s masterful 1950 film adaptation Rashomon. Peace was more taken with the texts, and particularly In a Bamboo Grove, the tale that invented the so-called “Rashomon effect”, by which multiple sources give conflicting accounts of a murder – including the victim, testifying through a medium.

“That just struck me as a brilliant way to approach crime writing,” he says. Peace eventually used the technique for his own novel Occupied City, which reopened the notorious case of the Teikoku Bank massacre in 1948 and allowed the dead to speak. Published in 2009, that book was the second in his Tokyo Trilogy and the eighth overall that he had rattled out in a decade, writing like a man possessed.

In the 10 years since, he has published only twice, and the final entry in that trilogy is still pending. If this suggests a loss of “raw pace”, as a football commentator might put it, Peace is no less dismayed by the slowdown than his most impatient fans must be.

“I can physically do the writing,” he says, “but I can’t sustain the confidence in what I’ve done for very long. I’ve lost a lot of that. I don’t mean to sound dramatic but it does worry me, and it’s financially disastrous as well.” Patient X has been something like a pet project in the intervening years, tinkered with in fits and starts, assembled in fragments that seemed to fit the style of Akutagawa’s fiction, and the known facts of his disordered life. Each chapter addresses a phase of his subject’s development as a writer, and his deterioration as an entity. Akutagawa was tormented from within by a fear of inheriting his mother’s insanity, and from without by the rise of nationalist violence and imperialist avarice in Japan. One section of the book describes the Great Kanto earthquake of 1923, which destroyed much of Tokyo, ignited wild, xenophobic conspiracy theories and deepened his own alienation.

Peace wrote that chapter after the quake and tsunami of March 2011. He was out of the country at the time, having moved back to Yorkshire (Dewsbury, West Riding) with his Japanese wife and their children in 2009. The idea was to be closer to his elderly parents and give the children their first real experience of England.

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“It didn’t work out,” he says. “I didn’t know how to do anything. It’s that thing where you’re home but you feel like a tourist. And I know this comes off badly, but I had never missed England. I left because I didn’t like the place. And being back there I just missed Tokyo.”

The relocation, or dislocation, was also “quite disruptive to my work”. He tried to get on with the third Tokyo book but struggled to reverse the method by which he’d researched Leeds-based crime novels while sitting in Japan’s National Diet Library. In the meantime, he attended events for Unite the Union, visiting labour clubs in areas that had seen the most ferocious moments of the miners’ strike (the subject of his 2004 novel GB84). “Looking back, I detected a real sense of wanting to go back to some old-fashioned idea of British socialism that came as much through the church and chapel as through Marx and Engels. You could see that the whole New Labour thing really hadn’t washed in these places. Dewsbury was suffering almost as much as it ever had.” Red or Dead, says Peace, was an attempt to make a case for the kind of socialism offered by Shankly, and Liverpool FC under his management in the 1960s.

“There was something a bit romantic about it. I’d never tried to write a positive book before.” He began that novel in England but finished it in Japan, returning with his family about a month after the tsunami – moving in the opposite direction to many western expats. Since then, he says, watching the UK from a distance, through Sky News, “has been a bit like peering through the bars of an asylum”.

The result of the Brexit vote did not surprise Peace in the least. “I thought it was a historical inevitability, which is not to say that I agree with it. The EU project, or the economic aspect of it, seemed to be based on a political union that a lot of British people never really went along with. After years of austerity and cuts to public services, the only real surprise was that Cameron and his people would put that to a referendum.”

Though hardly prone to populism, Japan’s own right-wing leadership is circling back towards imperial nostalgia and hardline insularity, and we seem to be living through times no less turbulent than Akutagawa’s. Reading Patient X, the old question arises as to whether some souls – certain artists – are so sensitive to the currents and shocks of history that they manifest them psychically. Peace was asking this himself, he says.

He cites an essay titled The Literature of Defeat by the Marxist critic Kenji Miyamoto, who was jailed by Japan’s military government in the 1930s. “Miyamoto said something like, ‘The fatal flaw of the bourgeois artist is to see in his own suffering the suffering of all humanity’. I have some sympathy with that because of the way I was brought up.”

At the same time, he leaves himself open to a certain writerly mysticism. All of Peace’s novels, and this one in particular, hint at some esoteric, occult element in the composition. While working on the last chapter of Patient X, he heard Akutagawa’s voice telling him to stop the book after the suicide, and before the funeral scene that he’d researched and outlined.

“I know how that sounds but I really did feel a presence. I’ve never experienced that before. I got to that moment and I heard him say, ‘That’s it. That’s where you should end’.”

Patient X: The Case-Book of Ryunosuke Akutagawa is published by Faber & Faber, £14.99