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I think it's more about the original Xbox being practically designed so nobody in Japan would want it, and the image sticking. The 360 has addressed the worst of its predecessor's faults and is doing a bit better, but it's not exactly a turn-around on of PS3-level magnitude.

Most of the stuff about Japanese culture being this and that honestly sounds like people can't understand a very complex issue like the difference between gaming in the West and Japan, and blame it on something vague and simple like "they don't like foreign stuff" or "it's too big for their homes".