As others have pointed at it seems more like a case of everyone else changed while you stayed the same. As an avid fan of Japanese games I have witnessed how my own tastes use to be catered to 10-20 years ago have become increasingly niche.

PC Gaming rose, western gaming rose, phone gaming rose and the whole market grew. Simply put, when things were smaller Japan and its sales expectations were ahead of many western counterparts. Now, they struggle to keep up in the arms race. Thinking about it, if you look to the Vita and 3DS, that's basically console gaming 10-15 years ago in certain respects.

My hope is can manage to least hold the line and not move more niche as a gaming future without Japan would be one far less appealing to me.

It would not be appealing at all. Holding the line is a pipe dream at the moment as Japan is taking that line with them as they run home. New gen is going to be finalized in a couple of months and we only know of 4 Japanese developers to actually have something ready. Look how slow they're moving. We know of more games from Indie developers!

That's exactly my point. If the Western developers can mold themselves to adapt the evolving industry, why can't the Japanese do it?

I can't compute that. They're not less talented. Why can't we get an Arcade: Action or JRPG from Japan on Xbox Live? State of Decay is very low budget and team size. Why can't they form new studios and get MS as a publisher, which is hungry to get a foothold in Japan?

I don't think PC development had anything to do with what happened in Japan. PC developers and console developers co-existed for years.

I think the decline of Japanese development last generation was because of the difficulty of programming with the PS3 and the failure of the Xbox 360 to sell well in Japan.

The difficulty in developing on the PS3 ballooned the development costs, increased the development time, and extended project windows. This wouldn't have been an issue for Japanese developers if the Xbox 360 had sold better. Because it didn't, the need to develop PS3 games meant there was no inexpensive development solution that would generate revenue. Something Western developers had the benefit of.

The other problem, is that with many Japanese developers releasing the games they did produce on the Xbox 360, in some cases long before the PS3, it pissed PlayStation fans in the US and Europe off. The result of which is those gamers (like myself) who have no affiliation with Japanese developed games, didn't rush to buy Japanese franchise games. In part because of the lack of familiarity, but also because of the game play. Turn-based gaming for most western gamers was a thing of the 90's at the latest.

Had Sony come out with something similar to the Xbox 360, and not a Cell-based PS3, I think Japanese developers would have been more successful and more prominent in Gen7. Japanese developers could have more easily relied upon the home market because the costs wouldn't have been so prohibitively high. And in the western markets you would have been able to reach your core market better. After all, the Xbox 360 probably wouldn't have been as strong of a seller had the PS3 not included the Cell processor. But it did, the Xbox 360 was the stronger console in the Western market, especially early on. As Japanese developers tried to court Xbox 360 gamers, and failed, the began to fall by the wayside.

Part of why I am still waiting for that big title to excite me about next gen.  Right now have that "oh, that looks nice, could be pretty good, will check it out" feel looking at PS4/X1 games.

Not much I can do except keep supporting game I enjoy, but I constitute a smaller and smaller portion of the market.

The gaming market is really weird but I still think that Japanese gaming world is disconnected from the rest of us. EA and other giants should invest in Japanese devs to bring their games to the West. Ubisoft have a JRPG game in development probably being made in Vancouver.

What's funny also is that not even Sony Japan was relevant for PS3 success. Thank Naughty and Santa Monica.
I don't know about Nintendo but their most prominent studio is in the West, Retro studio.
As for MS, I heard MS Osaka got something to reveal at TGS. I hope is a genuine and an excellent Japanese game.
Also my dream is that MS acquire Platinum Games their wild imagination would be perfect with MS pocket.

Not at all. The PC developers came into the console realm and boosted the western development process when Microsoft brought them through with the first Xbox. By the time the PS3 and Xbox 360 came the top PC devs had already jumped ship year after year. By the middle of the generation they were all multiplat and were making far more profit than they did exclusive to PC, so they developed on all consoles. The last PC devs to go full multiplat instead of full Xbox/PC was Valve if you recollect and Portal 2 was one of the top games of the generation. Ever wondered why WRPGS rose to prominance? Bioware came full time to console gaming after downporting their PC games from the Xbox to fill Microsofts ranks, and then MS funded their 360 version of Mass Effect to the 360 while also including in the contract that they stay away from Sony. Remember KOTOR 1&2 and Jade Empire? I sure as hell do.

Some of the best western made WRPG's made during the sixth generation. CD Projekt Red ports over Witcher 2 to the Xbox. You're telling me WRPG's aren't dominating? Come on. The Japanese couldn't even compete with the level of gaming. It threw the japanese off so badly they had no leg to stand on. In 2008 Hideo Kojima had to feel pretty bad that the console realm had instantly risen to prominence over the Japanese market. No one know why? Its easy..MS opened the floodgates for the PC devs to make a mass exodus to consoles with largely published titles. Bungie? PC company. Infinity Ward and COD? Originally PC games and MS got exclusivity when the Xbox 360 came for COD2.

Can you explain to me how the FPS genre took over the console realm? PC was left out in the cold until Steam rose to prominence. When Nintendo ran the gaming realm PC gamers looked down upon console gaming and laughed. When Sony and Microsoft joined, there was no longer anything to laugh about. Sony threatened the market and Microsoft signed off on creating the Xbox to stop them from threatening their dominance in the multimedia and PC market. 

http://www.ps3trophies.org/news/news-8989-Ex-Microsoft--Enforcer--Says-Xbox-Was-Created-to--Stop-Sony-.html

Microsoft came and who did they bring with them in the early 2000's? PC gaming.

I wont even get into the influx of the indies.

I'm sorry, but your original premise is wrong.

Of the studios that developed games for the original Xbox launch, only two were solely DOS/Windows developers before then. 

Bungie was an Apple developer.  The majority of the launch title developers had both PC and console development history, one studio had their first game on the Xbox console.  While the majority of developers for the original Xbox were western developers, four were not.  Tecmo/Team Ninja, and Sega being the two most prominante Japanese developers that released launch games on the Xbox. 

The most successful company to release FPS games on the Xbox, besides Microsoft, was Ubisoft and the Tom Clancey series of games.  Ubisoft's development history goes back to the Famicon/Super Nintendo, and include a number of different platforms as well as consoles.  Epic released it's Unreal games on the Xbox, but those actually came after the PS2 and Dreamcast versions were released.

The investment necessary to make the transition to multi-core, parrallel, and modern GPU development wasn't made by most Japanese developers.  While most Western developers were building 3D rendering and physics engines, Japanese developers were still largely locked in 2D gaming with scrollers, and platform games.  Western games made the transition to consoles long before the Xbox. 

Rare showed an FPS could work on the console.  What was missing from FPS games on the console wasn't the control scheme, but the means to play against someone.  With the original Xbox and Xbox LIVE FPS gaming began to climb, and it was Ubisoft that rode that wave. 

The only Western developer that Microsoft had to drag, kicking and screaming to the Xbox platform was EA.  In order to get EA to release an Xbox LIVE enabled game, Microsoft had to sell off it's sports games IPs.  

If two Western PC only developers are your evidence for Microsoft bringing PC developers to the console, it's a really weak argument.   The evidence, which a few minutes on Wikipedia will demonstrate, is that the companies that developed games for the Xbox were largely developers that had crossed over to consoles long-before the Xbox was released. 

Had the PS3 not included the Cell processor, had it ended up being a more powerful PS2, far more game developers would have made the transition the Gen7 consoles.  The problem was the investment to develop on the PS3 was far greater than most developers could afford, but fanbase for Japanese games was on the PS3, and while the PS3 sold well in Japan, in NA it didn't do as well.  With a smaller fanbase, development split between two consoles, and the development costs excessive for one over the other, it wasn't profitable. 

I don't think you quite grasp how significant of a paradigm shift happened in 2005/2006.  Prior to 2005/2006, game developers pushed the hardware on the PC.  They were constantly well ahead of the technological curve of hardware.  That's why you see software-based solutions to graphical processing problems prior to 2006.  The introduction of multi-core processors was the first change, which no game developer took advantage of until the Xbox 360.  PC developers were happy to get a core all to themselves that they could use and let the OS play in the other core.  A tri-core processor, with six hardware threads, all for a game was a big deal.  That was just multi-core symmetrical processing.  The PS3's Cell processor threw and even more extravagant wrench into the works, parrallel processing/programming.  Multi-core symmetrical processing/programming is still far easier than programming for a parrallel processor.  The concept was so foreign to developers that some of the initial PS3 games only utilized the PowerPC core, none of the SPUs.  Programming for parrallel processing involves a lot of code and memory management, as well as performance and timing tweaking.  It was a huge hurdle.  Kudos to Naughty Dog for all of the investment they made in it, but the fact that so many successful western developers struggled with it, there was no hope for small studios that didn't have large cash reserves or Sony to back them while they learned. 

The final challenge were the dynamic performance gains achieved in GPU.  Where as in the past developers were pushing the capabilities of the GPUs almost as soon as they were released, the GPUs that came in the latter part of the decade were far more capable than what most developers could easily push.  Crytek is the only developer I know of in the past 7 years to push the hardware technology that was available to it, and that was early on with Crysis.

Had the PS3 been easier to program for, I think things would have faired better for Japanese developers.        

Wow! Nice thread! You don't see a thread with a discussion like that everyday. Keep it up, please.