Just because the game market has regressed doesnt mean its dead. The console market (in general, not just Japan), is waiting for the next big innovation for gaming. Mobile will not provide that, however it is cheap and convenient so they're going to use that.
3DS is not innovative. It is too much like the DS. The Vita is fine, in Japan, but in the west it is just a half PSP/half tablet Frankenstein and people feel they already have the best of both and wont buy it. The PS4 is fine, but it lacks what is needed to push gaming forward. The X1 had potential but it fell short. The Wii U is just not what the market wanted, but may be a step in the right direction.
Truth is, until we get the next Wii or PS2 in terms of how it'll change gaming, the market will remain for the most part, disinterested. That next innovation seems to be VR, which is a fair bit away. I fully expect a regression everywhere until the market has a reason to own a new system, and right now the market has no reason to invest into sequels PS3->PS4, Wii->Wii U, 360Kinect->X1, DS->3DS, PSP->PSV. The market wants something new similar to the GBA->DS, or the GC->Wii U
