Well microsoft has done a lot to make the 360 respectable in Japan. And it is doing better then the original xbox (not that its hard to do so). They do have the most JRPG's out of all the current consoles afterall.
However I think thats the flaw to their strategy in Japan. One only has to look at the success of the casual titles in Japan (and Europe) to see the changing demographics in regards to game tastes in those regions. So in regards to japan they have a small hardcore audience which they're catering to, when they really should be attempting to target the mass market. They need more scene it style titles to increase the consoles potential audience. These more casual titles would also greatly help them in Europe.
The 360 has all the games it needs to maintain a large presence in America and whilst those games do sell well in the rest of the world I think they need to start targeting the expanded market, its not as if the hardcore titles will dry up, the 360 does have a huge amount of 3rd party support.
Another problem is the RROD. That needs to be eliminated.
To answer the question I don't think they can catch up to nintendo in hardware. I do think they can remain competitive in software sales for years to come though. However I do believe they can maintain their second place if they change some of their strategies.
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