There's no denying that the Wii was a sales monster last gen, but only 12m in Japan? That's a bit low for the market leader, compare it to the PS1's 19m or the PS2's 23m, it even fell short of the NES and SNES. You could say it got overshadowed by the PSP and DS, but the PS2 and GBA both managed to find strong success together. Were the Japanese simply not interested in motion controls? 

Because the main platforms for Japanese games were Handhelds and the PS3...while the Wii got a lot of great software, it didn't get most of the Final Fantasy games, JRPGs, or anime games that are a very important market in Japan

Until another console does "break out" there not sure how hard I'd be on the Wii. We may look back and say 12 million is the new normal for the console leader in Japan.

Probably the same reason why the ps4 isn't dominating Japan right now... They just hate home consoles

Japan wasn't impressed by the Wii's glorious motion controls!

Like you mention I think the DS/PSP overshadowed it and became a social phenomenon in japan with local multiplier games( Monster Hunter/Pokémon/Dragon quest) driving hard ware sales which in turn lead to more Japanese dev’s making software for the handheld consoles. That and the lack of jrpgs compared to the PS 1/2.

Ps2 had strong 3rd party and first party support unlike wii u

Playstation vita is an handheld and it sold poorly before it get support from third party  that why i don't believe japanese prefer handheld over home console they just prefer console who had better games.

Think the problem is Japan and not the consoles.

Smartphones and handheld gaming FTW

Same reason for any console it all comes down to games. The games didn't appeal to them. The reason PS4 isn't appealing to Japan is because once again no games. Heck it can be argued that even PS3 doesn't have the amazing diverse library PS2 did.

I guess they were satisfied with the handhelds. The Nintendo DS has an amazing library of games..