Actually the PS3 is $405 for the 20GB in Japan and $485 for the 60GB, which makes this situation even more scary for them.  They took huge profit losses to try and get the PS3 out at reasonable prices in Japan (they charge litterally twice as much in Europe).  So yeah, there is no way Japan will get a price cut, they are already killing themselves to get it to the japanese at such a low price.

 Correct me if I am wrong but I don't think there are any 20GB models for sale anywhere but perhaps ebay.  

They get hammered with Vat, in some place its +20%
They get screwd if the exchange rate is not in their favor.
They got to ship the damn thing, cheeper to get it in the stores in Japan then Europe.

They charge more becasue its costs them a hell of alot more to get them PS3s into European stores. 

If they can sale 60GB PS3 at 499, selling the 20GB PS3 at 405 is not that big a deal as you make it out to be. 

You are wrong, the 20GB was never discontinued in Japan.

Celb, I don't really see your point.  The fact is that Sony was already losing billions of dollars just to keep the PS3 price that low, now they are losing billions more to lower the price in America and Europe, so I fail to see how they can magically afford to drop the price AGAIN in Japan.

Weren't people showing their fangs when someone on these forums hinted that Sony may have a price drop, which was accompanied by the tune of "they can't afford anymore loss," and lo and behold, the price dropped in North America?

I don't know who, I would love to see an example of that though.  Everyone expected a price drop sometime in the near future in America, but it's not like they can just constantly drain money forever from Sony to keep the PS3 alive.  Sony doesn't have that much money that they can support billions upon billions every time some fanboy says "But it will help sales!"  Otherwise they would have just cut it to $400 in America, which is what they should have done.

They can do the same in Japan what they did in North America, discontinue the 20GB sku as Sony has lost, and still are losing more money on the 20GB compared to the 60GB.

With the emotion engine being cut out, Sony already starting production on the 65nm processor, and something Sony hasn't done with the PSX and PS2, they are reaching out to third party manufacturers to make their parts, which all translate to a cheaper PS3.

It's a gamble Sony could pull-off since the Japanese are buying PS3s as Blu-ray players, and considering that Blu-ray isn't winning the HD-market over there, it's dominating it.

Oh my God, they're releasing Disgaea 3 on the PS3, are they insane?  Look at the graphics:

It looks like a PS2 game.  The graphics would be fine on the Wii, but the graphics whores who own a PS3 aren't going to buy it.  Damn, this is one game I was really looking forward to.

Yes and the PS3 is 6.5 million units behind the 360, Sony is doing such great business. I am sure Sony is thrilled to have Peter Moore at EA. I mean they are used to 3rd party execs reaming them over their PS3 business strategies. Whats one more. Plus I am sure Peter Moore will do his best to ensure that the PS3 versions of EA Sports titles will actually run as well as their 360 counterparts

Wow, Tretton said something about the Wii and 360, and he gets mauled on these forums. Moore says something, that's when you guys try to spin a different light on things.