As many stated, we can't say yet that the japanese market is shrinking.

First of all, handheld sales are very high in Japan and if we look at most of the year, Japan would have a much larger percentage of the global market including handhelds.

The reason that the percentage is low even with handhelds is the period of the year as ioi has pointed out very well. At the moment, NA and PAL regions are selling way more than usually, while Japan is selling less than usual.

So much for handhelds and consoles combined. If we go into consoles only, things look a little different indeed. Assuming that the X360 can't pick up steam anymore and the PS3 continues to follow Gamecube's sales pattern, this depends completely on the Wii.

I was surprised as everyone else when I have seen Wii sales in Galaxy's first week. To know why this happened, we have to know who the Wii owners in Japan are.
There are basically two possibilities: First, most of them are casual gamers that started gaming with the DS or even with the Wii; and second, most of them are Nintendo loyalists and lapsed gamers that just bought the Wii much quicker than they bought the Cube.
the latter would explain a couple of things, for example, why the Wii sold stellar numbers until it reached Gamecubes lifetime sales and started struggling since, and second, why a Game like Galaxy couldn't push the hardware. If this would be true, it would mean that there's still a huge potential in console sales for casuals and Wii Fit should start a new boost.
Although these are interesting things, I don't believe that it is true and I go with the first theory that most people are casuals. That would mean that Nintendo fanboys are still hesitating with the Wii, maybe because they want more good software (in this case, Mario Kart and Smash Brothers could boost sales) or because they don't want to buy it now but at Christmas, what would mean that Galaxy as well as the hardware would see a boost in december.

To know which of those two theories is closer to reality, we have to wait for Wii Fit, Christmas and Mario Kart/Smash Brothers.
However, there's another group of gamers that is probably underrepresented in the Wii userbase, the PS2 gamers, i.e. the fanboys of huge-selling games in Japan, for example the FF/DQ crowd or the fighting-game fans etc. This group is mostly on the DS at the moment, but they are also waiting to see if the Wii or the PS3 turns out to be the homebase of their franchises in this gen. That means, if high-budget third party titles start hitting the Wii, hardware sales should start rising. A first indicator that this is true is this week with respectable sales for RE:UC although this is a second-tier game in my opinion.

 If over the course of a month (5 weeks) you can't get 100K consoles into Japan then your supply chain sucks, even during its launches Nintendo was capable of sending more than 3000 a week and more than 100K in five weeks

So no this sounds to me like a demand issue 

My predicitions are more realistic than the predictions of so called analysts who believe that the PS3 will recover in sales, or that the Wii's sales will fade

Sony was widely criticized for not having enough supply in the first couple years. Early production problem plagued the PS2. Are you forgetting that the NA and Europe launch were in Oct and Nov? They had to scrape up every unit for those launches and they were still way, way short.

 Yeah, but you forget that the PS2 was region locked, so it wasn't like you could just grab any PS2 and shift them around, you'd have to actually change them for different regions, different codes, which requires them to be changed at the factory, i'm sorry but it doesn't sound too likely that they would be unable to send more than 100 K in a month.

Also even if you can argue that they were due to supply issue, why was it that a year later in 2001, they were selling around 30-40K weekly (pretty much the same as the Wii is selling right now)?

You can't tell me that again it was a supply issue  

But Japanese gamers tend to buy more original software than in other parts ... EU and the US is infested by piracy ...

Then again in 2002 sales of the PS2 were in the 30-40K range right around this time, its like a yearly thing

hm, isnt that the sport where all the cool cats keep their feet really close together to show off how well they can ski? and Tetsuo is just full of hate. and always has been. just disregard him. 

Wii fit will no doubt give hardware a big boost. But things like

- New wii console colours, e.g. black, silver pink.
- How about a pink wii to coincide with Animal crossing being released on the wii/package deal etc.

Things like that could really boost sales

well lets see here are ps2 sales for this time of year

nov 12 2006 15.5k
nov 13 2005 21k
nov 14 2004 69k (must have been a price cut or something, there was a huge spike the week before with no big games released, was 20k oct 31st)
nov 09 2003 23k
nov 10 2002 40k
nov 11 2001 37k
nov 12 2000 20k

after seeing this data, i gotta think many of us are overreacting here.

its not about the japanese market shrinking its about everywhere else growing and catching up to the tech lifestyle of the japanese. look at the markets and demographics the wii has opened up in the us.

in the us we could see the wii oupace the ps2, the 360 outpace the xbox and the ps3 outpace the gamecube. lots of growth here as disposable income and freetime for gamers steadily increases.