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After all the hype from people here I too was disappointed by SMG Japan sales.
That was until I actually looked for myself at the Japanese sales figures from the last 2 Mario games on GC and N64. (SMS 0.87 million and SM64 1.92million in Japan)
It was never destined to be a huge seller in Japan and looks to be going on to sell somewhere between the sales figues of the last two games.

I think us Nintendo fans have been caught up in the mass hype that usually goes round when a big name for PS3 is about to be released and Sony fans manage to convince each other everything is about to turn around for the PS3, but end up being disappointed.