As most of us know the home console market in Japan is as of now incredibly shrunken compared to previous years. It seems like the market is only interested by mobile and handheld gaming and is shunning the PS4 and Wii U. Now let me ask you this what should Nintendo and Sony do to reclaim Japan?

For me I see three possible answers.

1. Completly ditch consoles and focus only on handhelds in the region.

2. Make a version of the new console suited to Japan (Similar to Famicon Vs. N.E.S but more drastic)

3. Try and cash in on Mobile gaming.

The real question is, how do we make the South Korean video game market more relevant? We get numbers for the US, Japan and the UK. Yet, we don't get numbers for South Korea? I mean, S. Korea is now has the 3rd largest video game market in the world... But we ignore them.

But, back on topic...
Japan hasn't ditched the Wii U considering it's the highest selling console in the country. I'm not too sure what you mean by "reclaim" if Nintendo already owns nearly the entire market.

Japan is an aging country, many folks are getting older and have jobs and responsibilities. Having a handheld device so they can game on the go is a much more attractive prospect than a home console. In short I think the writing is on the wall for home consoles in the Japan market.

Ditch consoles? Huh? Console sales are fine there, relative to the population. Japan still buys an awful lot of games, it just isn't as vital to the home console market as in the past. It's still one of the most important single countries in the world, however.

If they ditch home consoles in Japan because of low sales, they'll pretty much have to ditch ever other country in the world except the US.

The biggest thing I see with the systems is how tentative third parties are about moving on to the current generation. If the PS4 had managed on major next gen exclusive Japanese centric title even I think the outlook would be different. Just imagine if a Tales or Persona game was released this year only on PS4 there.

The question is how much do console makers value Japan enough to be willing to likely take a loss on a project there to win back some market share?

They should go back to being Playstation exclusive because by and large Xbox gamers only want to play Western style shooters. The Japanese market needs to be niche and to have niche coolness to succeed on a grand scale again. When they were making Playstation exclusives, they were greatly benefiting Playstation but Playstation was also greatly benefiting them. Now they're too spread out and particularly so trying to cater to a market that doesn't appreciate them ie. one trick pony Western shooter gamers.

Moar Anime games
Moar Tits
Moar Anime games with Tits

Jrpgs that don't suck would probably be a good start

This is the best strategy I've ever heard in a long time.

You want Japan? then do what you would do for any territory.

Give them games to play. As of right now, practically every kinda game that would typically sell well in japan is not being made by anyone anymore. In an entire console generation all you may have to show for it are like 3-4 JRPGs and one or two Ninja Gaiden type game. If you can get the output of games like that really high up, then you give life to the japan market again.

Find a way to get the people to mate so there are more young people to play games. The Japanese are like the pandas of the human world, their birth rate is pathetic and they live so long that the young that they do produce are crushed under the heel of having to care for the ever growing elderly population, the so called greying of Japan.