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Microsoft makes their money off of Live and attachments, so frankly they could probably reduce the price to 129.99 and get away with it. That said, I do probably see a 50 dollar price cut in the works. It would reverse the tide in Europe and give them the knockout punch they need in the USA, but it won't really affect Japan at all.

And lets be frank. They have sold over 100k units per week since late August. It's really not like they are begging for sales.