There are a variety of reasons for arcades falling out of favour in the 90's. The most obvious was the simple fact that the arcade machines no longer held the massive technological advantage that they previously had. Home consoles and computers were becoming powerful enough that their games looked pretty much as good as those in the arcades.

Well, I think they died in USA and Europe because people started to play at home instead for different reasons.

Why they didn't die in Japan? No idea, I can only guess that they have only small space in apartments in Japanese cities so that people meet in arcades to play with friends instead of meeting at home.

As smaller your home as more likely it is that you won't invite people to your home but meet them outside to interact with them. 

An arcade just opened in my town which i thought was strange. When i went inside most the games were just those stupid machines that give tickets for getting high scores in flappy birds, nothing really interesting.