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You mention the real reason right in your post. The PS3 f'ed up. The 360 is too marginal a player to affect the market the way you suggest. It's Sony inability to sell the PS3 combined with the Wii's weak ability at selling third party titles the way the PS2 did.

To me, saying MS is the reason the Japanese market is down is akin to saying McCain lost the election because of Ron Paul.