That's not true. They're like the only country in the world that censors the genitalia out of porn videos. Yet they still have a thriving porn industry... how?
There are specific historical reasons why that was the case for a long time (there are also specific laws regarding displaying pubic hair), I'm talking about the attitude of people towards nudity.
Japan is a very sex positive country which to me was actually shocking as they tend to be really reserved regarding public displays of affection.