It's kind of hard to hold onto a lead when you are losing by a good few million in Japan. Going up against Sony and Nintendo in the Japanese console gaming market is pretty impossible. Hell the only reason why Sony is in the position they are in in Japan is because Nintendo made a lot of really stupid mistakes with the N64 and allowed Sony to secure a number of key third-party exclusives for the PS1. Nintendo was unstoppable at one point. But their costly mistakes allowed Sega (I think the Saturn actually outsold the N64 in Japan even though Sega pretty much pulled the plug on the Saturn in 1997) and later Sony to take advantage. Timed exclusives of Tales of Vesperia and Star Ocean 4 doesn't win you a console war... That doesn't come close to the exclusive third-party library that Sony built up in the mid-late 90s.
The PS3 had Japanese exclusivity of Final Fantasy XIII (1 year timed), Metal Gear Solid 4 and Yakuza 3 and 4. That pretty much sealed the Xbox 360's fate.
