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Let's pretend we're Famitsu and we're basing good games are based on popularity. In this case, you can say that popularity is = to total sales. I looked at the top 10 selling games this generation to find whether Western created games or Japanese created games are better. Here are the results: (Wii Sports will not be included due to being bundled in the West)

#1
Wii Play
Total Sales: 25.33

#2
Wii Fit
Total Sales: 22.83

#3
Mario Kart Wii
Total Sales: 19.33

#4
Grand Theft Auto 4
Total Sales 13.48

#6
Modern Warfare 2
Total Sales 12.88

#5
Modern Warfare 1
Total Sales 12.11

#6
Halo 3
Total Sales 10.32

#7
World at War
Total Sales 9.76

#8
Smash Bros Wii
Total Sales 8.98

#9
Wii Sports Resort
Total Sales 8.93

#10
Super Mario Galaxy
Total Sales 8.29

Honorary mention:
Assasin's Creed
Total Sales 8.19

Here's my result based on my research. Keep in mind that my research is skewed and only includes consoles this generation and no handhelds.

1)Nintendo is absolutely kicking ass with software. They truly found a market for their games that goes above and beyond. However, there's no Japanese developers that have sold at the magnitud that western developers have. Nintendo alone is putting the good numbers. If the Wii hadn't existed you'd be seeing total Western domination. This leads me to conclude that Western developers are definitely attracting more customers that Japanese developers

2)I did search handheld sales and once again Nintendo owns the competition. PSP had some good sales but the #1 selling game was created by a western developer (GTA) and sold close to 6 million.

In conclusion, yes, Western developers are leading the way. I'm not saying that Japanese developers are not creating great games, but if we take consideration sales as a true measure of popularity and not scores given by magazines/websites (which in either case, can be very biased) then indeed western developers win.

That is all!