I'm pretty certain there are more Japanese PS4 games coming in 2016 than there were PS3 games coming in 2009. It's not even close to being dead.

Japan is going nowhere.

That's not the case, but support is bigger than what people expected last year.

Lineup is definetly nothing to sneeze at.

OP, your original premise of this topic was wondering if Japanese game publishers will live for a long time ...

Whether they embrace the western audience or not is redundant ...

If they all do, which I find to be highly improbable, I will stop gaming. I'd rather not game than be forced to play boring drivel like Assassin's Creed, Witcher, and Skyrim (among many many others) 

Japanese publishers/developers aren't going anywhere. Your friend is right.
Square Enix does incredibly well by knowing who their target audience is. Some of their franchises are huge solely because of Japan (Dragon Quest), some because they're huge mostly in the West (Kingdom Hearts, Tomb Raider), and some franchises are huge everywhere (Final Fantasy) Three out of those Four franchises are Japanese themed, and 2 of them do just as big, if not bigger in the West than they do in Japan.
Same goes for Capcom with Street Fighter, Resident Evil, and Devil May Cry, all of which are bigger in the West than they are in Japan. Also, Monster Hunter is growing in the West as well.
Atlus is doing pretty good. Same with Sony Computer Entertainment.
And Nintendo is Nintendo.

The only Japanese companies I can think of that are fading or going down hill are SEGA and Konami. And that doesn't have so much to do with changing climate in the gaming industry, or the gaming community shifting towards Western focued IPs as it does due to incompetence and stupid decisions on their parts.

Long story short, your friend is right.

All of my 3DS and Wii U games are from...Japanese developers and publishers!

I hope not otherwise I'm not going to have much to play!

But in all seriousness I can see both sides of the fence. Rising development costs are going to start nipping at the asses of Japanese companies (hence the run to mobile) and I don't see their audiences growing by much, though there are some bright spots here and there (don't want to sound too pessimistic).
And at the same time I can't really see Japan completely leaving the market. It would just leave a huge hole that I really feel like won't be filled that easily. Combine that many potential sellers aiming to fill that hole and well, there you go.

There are enough people in Japan who buy Japanese-themed games.

I'm pretty sure it is the case. At least as far as we know. Here's a quick list:

2009 PS3 games:

Naruto: Ultimate Ninja Storm
Demon's Souls
Street Fighter IV
Sonic Unleashed
Yakuza 3
Resident Evil 5
Warriors Orochi Z
Uncharted Waters Online
Dynasty Warriors 6 Empires
Atelier Rorona: The Alchemist of Arland
BlazBlue: Calamity Trigger
Record of Agarest War Zero
Katamari Forever
The King of Fighters XII
Mobile Suit Gundam Battlefield Record U.C. 0081
Tales of Vesperia
Dance Dance Revolution
Ninja Gaiden Sigma 2
Trinity Universe
Bayonetta
Tekken 6
3D Dot Game Heroes
White Knight Chronicles
PES 2010: Pro Evolution Soccer
Pro Baseball Spirits 6
Dynasty Warriors: Strikeforce
Dragon Ball: Raging Blast
Final Fantasy XIII

(28 games)

2016 PS4 games:

Odin Sphere: Leifthrasir
Yakuza: Kiwami
Dragon Quest Builders
Naruto Shippuden: Ultimate Ninja Storm 4
YU-NO: A girl who chants love at the bound of this world
Star Ocean 5: Integrity and Faithlessness
Dark Souls III
Crows: Burning Edge
Attack on Titan
Dead or Alive Xtreme 3
Dragon Quest Heroes II
Gravity Rush 2
Guilty Gear Xrd: Revelator
Hatsune Miku: Project DIVA Future Tone
Hot Shots Golf
Project Setsuna
Jikkyou Powerful Pro Baseball 16
The King of Fighters XIV
The Last Guardian
Ni-Oh
One Piece: Burning Blood
Persona 5
Sword Art Online: Hollow Realization
Summon Night 6: Lost Borders
Toukiden 2
World of Final Fantasy
Yakuza 6
Kingdom Hearts 2.8
Danganronpa 3
Biohazard: Umbrella Corps
Final Fantasy XV

(31 games)

Some of those PS4 games might not make it in 2016 (like FFXV or The Last Guardian) but I also don't think every games that will be released in 2016 have been announced yet.