Well plenty only had an 360 and their was a big group of MS fanboys and supporters remember the cat eating girl.  From the day that Tales of vesperia was announced for PS3 its support died. 

Compared to the rest of the world, yes sales do no look so good in Japan for the X360. Can you imagine the terrible Public Relations if Microsoft pulled out of Japan? They would be called racist, nationalistic, separatist, elitist, etc. It would be bad. Even if they are losing a little money, it's worth the boost image compared to advertising.

Now, what I don't understand it why not have full releases for most every in Japan that they have for the states. Is it really so expensive to hire a translator and some voice actors? Compared to the cost of making a game it seems pretty small.

There are a few Japan only releases I would like to play in the states, and I am sure visa-verse.

I also think they were expecting Kinect to sell better than it has been. They pushed a big opening Kinect in Japan.

not everything.  if they would use kinect with a game to peek up school girl skirts it would sell like hot cakes.   all a game maker has to do is watch those wacky japanese games shows that are popular and make kinect games for them.  instant gold

Yes theyve only sold 1.6 million so should pull out, same with all the countries we're they've sold even less than that, which is most countries in the world.
Thus the xbox360 can only be brought in a handfull of countries eg
US UK France Germany umm what else?, now thats a winning strategy.

Hell if I know. My guess is they are still making some sort of profit from the Japanese market.