Many Japanese developers have always been making games for the Japanese market, with this in mind it's hard to give them a worldwide appeal the game requires to be a huge seller worldwide. This problem arises because the first line of customers are the Japanese and they do not have too much experience about the western market.
When you guys say "make better games" you need to first think about what makes a game "better". All gamers have different tastes and each regions have some gaming genres that dominate the most. In The west, Action and Sports dominate, while on the East, story driven games with deep character development are more popular.
Developers then have two choices:
1) Make Japanese and Western games separately: This gives the advantage to developers because they can focus what different audiences like best and design their games accordingly. This can result in great sellers in each region but at the same time increases the risk, because the game HAS to be a success or the losses can be devastating for the company. This method requires more costs because of the increase in number of games for each region
2) Make universally appealing games: This on the other hand, reduces the costs of game development to a single project that is aimed to deliver a good experience to everyone. The only change required is localization. The problem with this route is that the game has elements that are appealing to a wider spectrum so a VERY careful game design is needed to not make the game mediocre in all regions.
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