Good question. No doubt everywhere else in the world they are making a huge profit on every system sold, otherwise there's no way they could sell it in Japan for more than $100 (USD) cheaper. I would guess they are not making a profit in Japan, and are subsidizing the Japan price by selling the system at such an extra high price everywhere else.
This allows them to give consumers in their home country a cheaper system, considering the weak yen would make it harder for consumers to buy a more expensive system, allowing them to continue to completely dominate the market there, while still making a ton of profit on HW sold in general by making extra high profit outside of Japan. Nintendo execs are probably especially proud of how much the Switch dominates their home market and are willing to sacrifice a bit of profit there to maintain that, successfully guessing (at least so far) that consumers elsewhere will pay whatever price they are given to make up for Japan's price, thus part of the reason why they abandoned affordability everywhere in the world.
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