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Microsoft can improve the situation in Japan. Plenty of western brands are successful in Japan so it's not like MS is destined to be doomed forever. The problem is they aren't smart about how they go about things over there. MS really shot themselves in the foot with these so-called "exclusive" deals for jrpgs. Tales of Vesperia, Eternal Sonata and Enchanted Arms all have had PS3 ports with exclusive content after starting out as Xbox 360 exclusive. The same thing is happening with Star Ocean 4. What a way to screw over Xbox 360 owners. Many Japanese gamers got a 360 just to play Star Ocean 4 and Tales of Vesperia and now they are screwed. Why not make all this stuff multi-plat right from the beginning? That way PS3 owners won't have to wait and Xbox 360 owners won't be screwed out of exclusive content. Final Fantasy XIII and Resonance of Fate multi-plat releases are the way things should be. No timed exclusivity crap. Everyone is happy (ok not everyone. Lots of Sony fanboys are pissed off because *gasp* Xbox 360 owners liked Final Fantasy back on the PS1/PS2 are not being ignored by Square Enix.)

If MS really wants to improve their standing in Japan, they should stop relying on third-party Japanese publishers (Tecmo, Namco Bandai, Square Enix, From Software, etc. are in the business of making money, not in the business of pledging loyalty to Microsoft) to release so-called "exclusives" and focus more on first-party efforts (ie. publishing Mistwalker's games like Blue Dragon and Lost Odyssey). First-party games are guaranteed to stay on the 360 and aren't going anywhere. Unless the developer owns the IP (ie. Ninja Gaiden was published by MS but Tecmo owns the rights of the series). In that case, don't publish the game if you don't own it.

Giving incentives to third party japanese devs working on PS3 games to go multi-plat is a good move as well. It's not going to make much of an impact in Japan but it's good business in the west. Stealing FF13 exclusivity from Sony was a wonderful powerplay and while the 360 version won't sell as much even in the americas (since I predict that the japanophile "M$ sucks because it's american" effect will give the ps3 an edge), it'll still sell very strongly. Sales of Resident Evil 5, Devil May Cry 4, Street Fighter 4, etc. prove that the 360 can sell multi-plat Japanese games reasonably well in the americas. Much more significant to the MS bottom line than all those so-called "exclusives" were.