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The Japanese gaming industry has a lot of problems, but in regards to the software. I would wager that the majority of the problem lies within the traditionalist mindset. Japanese developers are fundamentally making the same games they were making ten years ago, or even twenty years ago. Which are largely linear affairs. While Western studios have embraced a sandbox design philosophy. Which places emphasis on giving players freedom to do as they wish.

The problem is that Western audiences have evolved, and the Japanese audience has remained intractable to even the hint of changing how they view or play games. Since the West isn't going to regress, and expect less from their games. Then the Japanese consumer must evolve to accept that games can be a more liberating affair. The way this is going to happen is for the Japanese gaming industry to stop coddling them as it were.

Japanese developers need to start forcing the issue, and be entirely unapologetic about what they are doing. The point has to be gotten across to Japanese gamers that things are going to change, and they are going to need to change with them. That means that Japanese developers are going to need to muster up the courage to shock the ever loving shit out of their fans. They can't just drag the consumer in Japan kicking and screaming the whole way. They are going to half to turn them around, and slap them right in the face. They are going to have to tell them like it is. Either your going to be with me as I try to catch up, or I am going to abandon you completely.

The point is Japanese developers need to make radical departures from what they have been doing. The gamers in Japan may throw a tantrum for a while, but after a couple years they will settle down, and they will adapt to the new normal. This is a culture historically speaking that will be intransigent right up until the point where the issue is forced, and then just buy right into the new way of doing things. So why wait to do it at the beginning of a new generation. When it would be better forced at the end of a generation.