I don't think they are being arrogant, just realistic :)
The PS4 basically received all the major support it could have received from Japanese 3rd Parties. You had Monster Hunter, Final Fantasy, Yakuza, Resident Evil, Kingdom Hearts, Metal Gear Solid, Nier etc all exclusive on the ecosystem in Japan. It basically lacked any competition until 2017 when the Switch launched and despite that it will sell just fractionally better than PS3. Square was actually contemplating releasing DQXI exclusively on the system even though DQ is historically been a franchise that is on both Sony and Nintendo consoles.
The situation is unique as PS4 faced the Wii U initially and received the lion share of support. This won't be the case with the Switch, I doubt that all of the biggest 3rd party games in Japan will be on the Playstation 5 without some sort of exclusivity deal. Even if the next Monster Hunter is cross-gen exclusive on Playstation ecosystem, it's ceiling is going to be around 3.5M in Japan with digital. While a PS4/PS5/Switch DQXII is likely to easily sell over 4M.
At this point, it's impossible to compete with the Switch in Japan with a traditional console, so it's better to be pragmatic and base your growth strategy in other countries and regions.
The interesting thing to look out for it Asian Markets - Taiwan/South Korea/China has been trending towards Nintendo since the Switch launched there, prior gens these regions were uncontested by other hardware makers. Since for Microsoft North America has always been the main market with Europe & Rest of the World secondary, while Nintendo had a monumental failure with the Wii U and is only now rebuilding a strong presence in the minds of these audiences.
