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Even if we make this comparison just Playstation+Nintendo, the numbers don't look good.

PS1+N64=25 million

PS2+GC=27 million

PS3+Wii=23 million

So the last 3 generations have sold roughly 25 million for Playstation+Nintendo. PS4+Wii U won't even hit 20 million (probably a few million below), the Japanese market is in decline, it's not even a debate. Is it dead? No, not even close but certainly declining.

 

Consoles are indeed on the decline down there, thankfully the Playstation 4 is doing good there (and better than the Ps3) and because of that we are experiencing a resurgence of Japanese games on this gen, which is a good thing.