Which country currently has the best development studios?

[Idree]

Japan

Capcom, Square, Konami. :)

Capcom list:
Mega Man
Street Fighter
Onimusha
Devil May Cry
Resident Evil
Captain Commando
Strider
Breath of Fire
Darkstalkers
Final Fight
Marvel vs. Capcom
SNK vs. Capcom
Dino Crisis

I love Blizzard & Valve, but Capcom remains king :)