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Poor international adaptation all around.
No Japan-based studio.
No Japan centric first party games.
Only good jrpgs were new IPs which typically don't sell.
ONLY Jprgs for the eastern market, when Japan has many genres that we don't see in the west.
No investing in Japanese branding or marketing (or should I say effective brand/marketing)
No alternate sized controller.

It's really not hard to effectively adapt to another culture, but it requires changes that MS didn't see fit to make.
Nintendo and Sony are very Japanese systems that sell well worldwide because the Japanese doesn't get in the way. Xbox is a very American console, and Japan doesn't like it because the American gets in the way.