I'm not surprised about Nintendo, both the initial rejection and now the reversal, but I am kind of surprised about Microsoft. They were actually going after the Japanese market back then. I guess maybe they thought it was tooo Japanese.
Good on the producer for sticking to his guns. The Japanese gaming industry trying to replicate what the west was doing was a mistake.
Nintendo was probably still on their family targeted audience back then (Gamecube) and i also confused why Microsoft rejected , because Shenmue 2 released on original Xbox. And how close Sega is with Microsoft.