A big reason why the Xbox 360 doesn't appeal in Japan is that it is a niche within a niche (HD gaming). Portables are all the rage in Japan and then you have the Wii craze going on. The HD gaming market is small as it is. If you look at the HD gaming market only, the Xbox 360's market share is a respectable 20% (4:1 for PS3). It has a decent following with HD gamers. But the PS3 following is growing at a very fast pace due to the whole Slim 299 thing while the 360's growth has fizzled out. Before the gap was 3:1, now it's 4:1 and growing.
I think the marketshare shrinkage is inevitable. The Xbox 360 pretty much hit the glass ceiling for hardcore HD gamers. All those gamers buying a PS3 Slim now are either more mainstream-oriented gamers (as opposed to the early adopting hardcores) looking to finally get into HD gaming or PS3 Phat owners looking to upgrade.
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