The Wii is absolutely competing head-on with both the 360 and the PS3. Even more so in Japan.
Tell Capcom that they aren't competing head-on and they'll laugh at you and point to Monster Hunter 3. Their BIGGEST Japanese franchise was canceled for the PS3 in favor of the Wii.
Tell Namco that they aren't competing head-on and they'll laugh at you and point to the flop that was Eternal Sonata and their 5 RPGs on the Wii for their zero announced on the PS3 and 360 RPGs.
Tell Square Enix that they aren't competing head-on and they'll laugh at you and point to the DS, which started against the PSP with the exact same sentiments. They'll point at Dragon Quest Swords which is the best selling 3rd party home console game in Japan this generation.
Tell Koei that they aren't competing head-on and they'll cry while pointing to the ridiculous flop that was Dynasty Warriors 6. A once nearly 2 million selling franchise reduced to under half a million between 2 consoles.
The Japanese market is absolutely a direct competition between the Wii, PS3, and Xbox 360, and the Wii is slaughtering the other 2.
