No they didn't. People called RPGs from Western developers PC RPGs because that's the only place they were popular. It wasn't until games like Oblivion and Mass Effect, where people started differentiating the two by region.

OT: Xenogears will always be number 1 in my heart, but I'm glad it's rated so high.

I know they're terms made popular in this gen. I wasn't on gaming forums before 2007, so they could be decades old for all I know. I never heard of either term before this gen though, so they definitely weren't used regularly in gaming magazines or media sites. Going by the sorting choices for RPGs on Gamefaqs (an old enough site), these probably evolved from the terms "Console Style RPG" and "PC Style RPG."

At least from what I recall, the stereotype terms WRPGs and JRPGs started gaining popularity during the sixth generation, when more PC RPG developers started to enter the console market (and thus competing head-to-head with Japanese RPGs which were already on consoles), some notable examples include Bethesda (Morrowind) and Bioware (Knights of the Old Republic). Prior to that, people used to refer to games like Baldur's Gate, Icewind Dale, Fallout, and so on, as Computer RPGs (CRPG), which was a term to distinguish them from pen-and-paper or tabletop RPGs.

Like I mentioned earlier, the terms WRPG and JRPG are more stereotypes than they are actual genres, because unlike terms like tactical, strategy, or action, there is too much subjectivity behind what defines a WRPG or JRPG (and thus we have disputes like this, where people disagree on what one game is or isn't), not to mention that there are so many exceptions that they really make no sense.  In contrast, most people understand and agree on what makes a turn-based RPG, which is why it's one of the better genre descriptions.

For the purposes of the original OP, using the term JRPG simply to distinguish RPGs made in Japan is a simple and objective criteria, instead of overly complicating it by wondering which games fit along that the stereotype meaning of JRPG.

Australia is a western country so its RPGs would be WRPG. I consider demon souls a JRPG.

I'm with KylieDog. The genres diverge based on gameplay, not country of origin. 

http://en.wikipedia.org/wiki/Console_rpg#History_and_classification

After the success of role-playing video games such as Dragon Quest and Final Fantasy, the role-playing genre eventually diverged into two styles, Japanese role-playing games and Western role-playing games, due to cultural differences, though roughly mirroring the platform divide between consoles and computers, respectively. Finally, while the first RPGs offered strictly a single player experience, the popularity of multiplayer modes rose sharply during the early to mid-1990s with action role-playing games such as Secret of Mana and Diablo. With the advent of the Internet, multiplayer games have grown to become massively multiplayer online role-playing games, including Lineage, Final Fantasy XI, and World of Warcraft.

After the success of console role-playing games in Japan, the role-playing genre eventually began being classified into two fairly distinct styles: computer RPG and console RPG, due to stylistic, gameplay and/or cultural reasons; with the latter having become popularized and heavily influenced by early Japanese video games such as Dragon Quest and Final Fantasy. In the early 2000s, however, as the platform differences began to blur, computer RPGs and console RPGs were eventually classified as Western role-playing games(or WRPGs) and Japanese role-playing games (or JRPGs), respectively.

Correct you are sir!