and Capcom for the most part. Resident Evil and Devil May Cry are successful worldwide. 

What he's saying is that they need to stop making Japanese games that try to appeal to a Western audience.  They should let Western developers make Western games, and Japanese developers make Japanese games.  This is possibly the first astute thing I've ever heard Wada say.  And then we collective spaz out on him.  And act as if he said the opposite, or as if the real issue is that he hasn't realized he could just make his company like Nintendo and everything would be great.  I'm starting get the feeling there's a real disconnect with reality here.

This isn't a full answer, though. S-E's current business model cannot be supported by sales of Japan-centric games alone.

I think an overlooked factor in the decline in the performance of Japanese games in the west is that it coincides with the more cinematic presentation of modern games. Before voice acting, and in the early days of it, the anime sensibility underlying most Japanese games was pretty easy to ignore, or pretty easy to subconsciously translate into something more palatable.

But now every game has voice acting, and Japanese companies hire really, really terrible voice actors. And poof, Japanese games go from cool straight to lame.

This coming from a Man wearing a suit LMAO!

That's largely admitting defeat, though. It's fallacious to think that the one side should focus on itself. They should be reaching more broadly than that.

Where does he say that?

He's saying let Western devs lead on western games, and Japanese devs lead on Japanese games.  If this leads to the Japanese developers at SE making games which are unapologetically japanese, but SE still localizes them for the rest of the world, that would be exactly what most of the people on this forum want.  At the same time, they have already seen success with their support of Eidos, a company that was considered to be dying before they stepped in.  I'm not sure we disagree...  but I'm also not sure what you're saying, Khuutra?

What kind of defeat?  Financial defeat?  Eidos seems pretty profitable these days.  The good games keep coming.  A GOTY contender last year, Guardian of Light looks awesome for this summer.

I don't think he's saying they should stop localizing games wordwide and aiming for worldwide success.  He's saying that to make a solid, interesting game in a given style, it's better to focus on having a coherent team that likes the same things, rather than some kind of Frankenstein team that is supposed to magically make a game for everyone just because of the mix of people developing it.

Also, that's a funny sentence in your post...  I understand you're talking about where they should try to sell the games, but Wada is talking about the focus of the people who make the games.  And that sentence seems to suggest that the last thing you want to do is focus on what you understand and would want to play, as a game developer!  God forbid! 

This is a really good point, and like you said, one not acknowledged or discussed enough in general.

Wow, that, uh... that really puts me on the spot, because my Google fu is weak, but my understanding is that Wada and other notable Japanese development presidents (Namco-Bandai in particular) have spoken out about how the Japanese market can't supprot itself and they have to appeal to the West. Otherwise they have to severely cut spending and acceppt lower revenue streams, which (I guess) they fear will make them burst into flames.