In neither case would it have ended well. Microsoft's handling of the Japanese market and Japanese development community has ranged from poor to disastrous, and Monolithsoft would be no exception.
That said, Sony doesn't have the best track record with in-house Japanese RPGs, either. They've made a few attempts at the genre, but other than Wild ARMs, none of them spawned long-running series. Even Wild Arms died with the PS2 and PSP. And they pretty much shuttered their Japanese development years ago,
Only Nintendo would have given them the time and resources they needed to shine. Nintendo wasn't perfect in their handling of Monolithsoft either, with Nintendo of America's mishandling of the original Xenoblade on Wii - thanks a lot, Reggie :P - but Monolithsoft filled a niche Nintendo wanted and needed.
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