Saw this over on NeoGaf
"So popular was the first PlayStation that Sony enjoyed a vice-like grip over the hearts and minds of Japanese publishers. They were afraid to alienate Sony by supporting Microsoft. In some cases, they were even afraid to be seen to support Microsoft."
" 'I remember going to a Sony party at E3,” Bachus says. “They had every one of the major Japanese game publishers who we'd spent a lot of time with in Japan. I ran into one of these guys, who was standing with Ken Kutaragi. At first he was like, 'hey!' and his face lit up. And then he realised he was standing next to Kutaragi. 'Oh, oh, I'm sorry, do I know you?' He pretended he didn't because he didn't want to alienate Sony.' "
"We were told we couldn't call it the Xbox because X is the letter of death,” Fries remembers. “We were told we couldn't make it black because black is the colour of death. I was like, isn't the PlayStation black? Rules that apply to you as an outsider don't necessarily apply to insider products.”
"Fries was told he couldn't release Halo the way it was in Japan because Japanese players wouldn't be able to deal with the dual sticks. 'So we ended up having to make a bunch of modifications for Japanese players and dumb the game down, make an easier version.' "
"The Xbox was a beast of a games console, heavy, bulky and devoid of subtlety. It was made out of inexpensive black plastic with a controller seemingly made for hands the size of those pointing finger gloves you see at baseball games. It was everything the Japanese thought an American-made games console would be. “We thought it would be more like what PlayStation 3 looks like now, something sleek and sexy,” Bachus says. “For a number of reasons, mostly related to cost, but also partly related to thermodynamics of engineering the box - air flow and the size of components - we just weren't able to do that. The Japanese looked at that and it reinforced the notion this didn't have a Japanese aesthetic. This was a console that was for western gamers and was being made available in Japan.' "
"Microsoft had heard from publishers that Sony struck different loyalty rates with different publishers. Microsoft wanted to create a level playing field where all publishers paid the same royalty fee, but this rubbed some Japanese the wrong way. “They thought we'd buy their loyalty,” Bachus says."