Technologically. Yes. Creativity ? Its quite true. But Japanese dev still make some of the best and innovative game this gen like Valkyria Chronicle, Bayonetta, Persona 4 (its PS2 game but out around this gen) Demons Soul and MGS4. Not to mention Wii games which had revolutionize gaming industries.

Ridge Racer! On topic now they even hate thier own kind.

Like most people already posted: I think the statement is true when looking at the Japanese industry without Nintendo. This has been said for the past five years though (not by Namco) by various sources in Japan. 

Everyone was shocked when Nintendo made the impact and foothold they made with the Wii (the handheld market has always been dominated by Nintendo so I won't include that as landmark). Nintendo was actually bucking the trend and won over the real gaming market (the casual consumer and the mass population). 

Overall I would have to agree, however Nintendo must get a big shoutout, however one developer isn't enough in my eyes to compare to the whole plethora of Western developers at the moment.

Tha balance certainly has shifted.

Provided you ignore Nintendo, this is arguable.

Because all western games are grey GoW clones...

Since you listed some niche games why don't I? Becuase for every Little Kings Story theres a western game thats just as imaginative.

Machinarium, is beautifully hand drawn and has no dialogue, preferring to show everything through image bubbles and visuals.

Braid, again it isn't a grey clone of a 3rd person shooter. It features some of the most innovative uses of time in any game.

Darwinia uses the pixalated and low polygon look thats not too dissimilar to 3d dot heroes. Yet it came out several years before.

Again, this assumption that all western games have no artistic merit (or more specifically don't fit the colourful aesthetic that so many people love) is not really an accurate assumption. Not everything in the west is colour reduced.

Japan makes plenty of interesting and innovative games, they just don't relase them in other regions because they don't think foreign audiences will find them appealing( Disaster, Captain Rainbow, Fatal Frame 4).When they try to "go Western" we end up with terrible games like Resident Evil 5, a shooter/action game claiming to be a chapter in aruably the best survival horror franchise. Personally, I think all the Japanese third party developers should turn to children for and anime shows for new ideas. Also, they should take some risk and try to do something that hasn't been done to death in the West or in Japan, a difficult task to say the least but it'd beat just trying to copy what sometimes works for Western developers.

technology wise the west is definately ahead and creatively well thats the opinion of the person playing the game.

Dunno, really. Nintendo is still making wonders with his Wii console. But still, that's weird coming from a Japanese developer. That's not the way you sell games: "oh, competition is better, we're no longer setting the bar". That's odd...

The technology is better from Western developers, ok. But creativity, hell no.

It really is the worst time to be saying this, with Nintendo as successful as they are.

If you look back 5-10 years ago like he said, it was definitely worse. Western developers were always ahead technologically (remember PC gaming?), and creativity from Japanese developers wasn't any better than today (Nintendo wasn't nearly as strong back then).