Microsoft tried to change Japan's taste for the Xbox. Microsoft did not adapt to Japan.
What is the number one restaurant in Japan? McDonalds. But how can this be? According to teh interwebz, Japan is the most racist nation on Earth! Well, guess what? McDonalds changed some of its menu to fit Japanese taste! For example, teriyaki burgers, shrimp burgers, etc. etc.
Microsoft released big games like Halo and Gears of War hoping they would sell in Japan. They were wrong. Yes, they came out with Japanese style games... 3 years too late. From late 2007 to mid 2009 they did OK, with games such as Lost Odyssey, Infinite Undiscovery, Star Ocean 4, Eternal Sonata, The Last Remnant, Tales of Vesperia, Ninja Gaiden 2, etc. etc. but by then it was too late, Japan had rejected the 360. If that was the lineup from early 2006 to 2007 then the Xbox 360 could have probably sold around 6-8 million in Japan.
Think of it this way. The Genesis sold like 3.5 million in Japan. The Saturn sold 6 million, nearly double despite it being a "failure." Even though Sega is Japanese, the Genesis lacked many Japanese games, especially compared to the SNES. However, the Saturn had many games that appealed to the Japanese audience and thus the Saturn sells really well in Japan.
So I debunked a few myths here.
MYTH: Japan refuses to buy American products
TRUTH: Japan's biggest restaurant is McDonalds. Japan's most popular cola product is Coca-Cola. Japan's most popular coffee is Starbucks. Japan's most popular jeans are Levi's. Apple owned Sony in the portable MP3 market a few years ago and phone market now.
MYTH: Microsoft tried really hard in Japan
TRUTH: It was too late when they did. The Xbox was an insult to the Japanese. It was even named "Project Midway" as a sign that consoles were going to be dominated by America (the Battle of Midway was the turning point of the Pacific theater in WWII). Then of course "Xbox" is a terrible name in Japanese. For example, "Xbox One" means DIVORCE in Japanese! Source :http://injapan.gaijinpot.com/live/learning-japanese/2012/10/29/japanese-slang-batsu-ichi/
Then of course, "X" means to cancel in Japanese as well (for example, on the DualShock, "X" cancels and "O" is for accepting). So right off the bat the name is wrong.
Then it was huge and clunky. Then MS released no JRPGs of note on the Xbox. Then it launched the 360 with the weakest lineup in Japan's history. It was like 6 games and only 2 were kind of Japanese (Tetris and Every Party). And MS ignored it in Japan until as noted late 2007... by then it was too late.
MYTH: Microsoft cannot succeed in Japan
TRUTH: It can. But it has to be smarter. Get an anime mascot like with IE and Windows. If you must, license it to Toshiba and change the name (as the Xbox brand is damaged there). Change it something like the "One Box" or whatever, I don't know. Then when you launch it, get a few Japanese exclusives right away. Get the interested.Get deals with Japanese TV and make it look like you are working to get a foothold in Japan.
To be honest, Japan isn't as crucial as it was in 2005, but I think you still need to do good there to win the console war. MS could try and aim to sell 5-7 million if they play their cards right, but they probably won't.
