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I think Iwata does follow sales trends very carefully. Including those of the competition.

The main reason for instance the DSi exists at all IMO is only because the PSP started outselling the DS in Japan.

Iwata wants to "win" ... Yamauchi was different, he would sit back and let other companies build up an attack strategy against Nintendo and eventually that led to them stripping away much of Nintendo's market relevance.

Assuming Wii 2/Wii HD release automatically means the current Wii is phased out of the market is also outdated thinking. That's not how the game market works anymore. Maybe back in the NES/SNES days (even then I recall the NES stocked at most retailers well into 1992/93).