I think the question "Will Japan matter?" is an interesting one and I think Japan will always matter to some degree but that it will be less and less as time goes on. The reason I believe this is because of game budgets and the way they increase with each generation of consoles. I know that "Wii" will likely be the first word on some people's lips but that is a system that slows down the trend, it's not going to stop it. Eventually there will be a successor to the Wii that will likely be HD and more powerful and the same with the successor to that system.
Now the reason why game budgets are important when talking about Japan's future position in videogames is because a game with a large game budget requires a lot of sales to break even and that will likely cause problems for many Japanese developers wishing to make Japanese-centric games that appeal mainly to Japanese customers. This likely won't be a problem for Western developers who's Western-centric games have a large enough audience outside of Japan giving them a better chance of recovering their cost. So it's likely that there will be some kind of shake up in Japan in the future and the number of Japanese publishers and Japanese-centric games will drop.
This leads me to something I remember from an episode of Bonus Round on Gametrailers in which they talk about Western games doing poorly in Japan compared to Japanese ones. It mainly came down to the differences in culture between Japan and the West and how violence is perceived in them. Someone then asked the question: "But why do American movies do so well there then?" and it was answered by someone with a lot of knowledge of Japanese culture with "Because American movies have the biggest budgets that other countries simply can't compete with".* I think that something similar will happen with videogames as well, probably not to the extent of Hollywood movies but it will still be significant.
*Not the exact question and answer but very close, I'm too lazy to go look up their exact phrasing.
