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Sony have 4 studios in Japan. 1 of them works exclusively on a western-and-mostly-European focused IP (Polyphony). One is a tiny team which has literally fallen apart at the seams (Team Ico). That leaves Japan Studio & Project Siren to try and corner the Japanese market.

It's not like they've closed any studios down which has caused this gap that used to be filled with their games - fact is, they've never really been there. Even when Polyphony, Team Ico, Project Siren & Japan Studio were at their 'peak', the titles were still mostly geared towards the western market (Japan Studio came closest to appealing to the east with things like Dark Cloud, Rogue Galaxy & Ape Escape).

I think the long and short of it is that basically, they've never cared about the Japanese market. When they had the market cornered, all the third parties came to PS1/PS2 anyway so those consoles sold well in Japan, no need to worry about it (and they weren't running a line of handheld consoles as well).

With the introduction of PSP; the early failings of PS3 etc., the position wasn't so concrete anymore - Vita's game drought demonstrates this. And they still don't really care. The small third parties who have always been there will continue to show up - Gust; Nippon Ichi; Nihon Falcom etc. Some of the bigger Japanese companies will pledge some support - SEGA & Bamco for example seem pretty dedicated to Sony consoles.

Like the article says, I'm not too worried about PS4. Things from PS3 will migrate across and it will at least get a foothold in the next generation. I'm sure things like Yakuza; Dynasty Warriors; Atelier will move across with the generational leap and the dedicated fanbases these games have will move with them. Maybe they'll work out something with Squeenix to get Versus XIII there. But otherwise, I certainly doesn't appear like Sony is too fussed about making the console any bigger than that. Which is alright for the PS4 - but as we're seeing at the moment - is lethal for the Vita which doesn't have the same dedicated series which could have transitioned across from PSP.