did very limited damage against the allies.

German submarines did a lot of damage to the Allies. That they didn't do more damage is due to effective anti-submarine measures (convoying, intelligence, radar). That the damage didn't wreck Allied war-fighting capability was due to an immense ship-building program. Japanese anti-submarine warfare (weapons, tactics, and intelligence) was inferior, and their ship-building capability greatly inferior.

Expanding on that short summary:

German submarines sank about 14 million tons of Allied merchant shipping, almost 3000 ships. The total number of German submarines during the war was about 1200 (almost 800 were lost during the war, not counting boats scuttled at the end of the war). Many of the surviving submarines at the end of the war were working up, and had not undertaken any war patrols. That's an average of about 3 ships, 10,000 tons, per German submarine. This isn't the best metric - perhaps better is the average per combat patrol. German submarines carried out about 3500 war patrols during the war, so about 0.8 ships, 4000 tons, were sunk on average, per patrol.

US submarines sank about 5 million tons of Japanese merchant shipping, about 1300 ships. The USN had 288 submarines during the war, most of which served in the Pacific. 263 of them sailed war patrols, almost 1500 war patrols in total. The averages are 4.5 ships, 17000 tons, per submarine, and 0.9 ships, 3000 tons, per war patrol. US submarines sank significant numbers and tons of warships (about 200 ships and 0.5 million tons), and adding those gives about 0.9 ships and 4000 tons per war patrol.

German submarines faced much better anti-submarine measures. British and US escorts and patrol aircraft had better sonar, better radar, and better anti-submarine weapons than Japanese escorts, and the Allies effectively used intelligence to divert convoys away from U-boats. The tougher opposition faced by the Germans doesn't appear to have translated into fewer sinkings of merchant ships compared with the USN results, since the sinkings per war patrol are similar, but certainly resulted in higher losses.

So, why was the Japanese merchant fleet largely wiped out, while the Allied merchant fleets continued to operate effectively throughout the war? Japan built approximately 1 million tons of additional merchant shipping during the war, not even close to replacing the losses to US submarines (and then there were the losses to aircraft and USN surface units). The Allies, on the other hand, built over 30 millions tons of Liberty ships alone (2700 ships), and despite their losses, the available tonnage of shipping grew.

The lesser anti-submarine capability of the Japanese isn't reflected in the number of sinkings per patrol (and one should keep in mind that "lesser" doesn't mean "insignificant" - the USN submarine losses of about 20% were high). One major reason is that near the end of the war, there were relatively few targets available - most Japanese merchant shipping had already been sunk, and most of the IJN had been sunk. If there are no ships to be sunk, how can the submarines sink ships? Also, US submarines were often deprived of opportunity to sink merchant shipping by being used for reconnaissance/patrol against Japanese naval forces.