Certainly Nintendo is saving the Japanese games industry. Capcom is a good indicator of where the Japanese industry would be going if Nintendo hadn't done what they had done. The big Japanese dev houses, the ones who are investing a lot in PS360, are either working towards Western tastes (RE5, MGS4) or becoming niche (Square Enix, Bandai-Namco)
With Wii and DS, you see a rennaissance of Japanese development

Monster Hunter: pissing me off since 2010.







