It's getting more irrelevant by the year, but the sales are still on a high level, It's getting more and more obvious though that Japanese centric games are going to die out. It's not sustainable to make games for a very limited customer base, especially when development costs are on the rise.
Either that or Japanese developers will focus exclusively on mobiles in the near future.

Japan is simply dying. That's just it.

Sad thing

The Japanese market is definitely different than the Western markets.

Console gaming hasn't been the core of the overall gaming market since somewhere between the 5th and 6th hardware generations. By the 7th generation, it was pretty apparent the market preferred portable gaming, even as dedicated handhelds were being supplanted by smartphones.

It appears that the only thing keeping dedicated gaming platforms alive in Japan is the deliberate attempt to keep most core franchises off mobile platforms, particularly by Nintendo. By the time that transition happens where portables may cease to exist (the success or failure of the Switch will be a strong indicator of future trends heading into the post 9th generation market), it won't be possible to track the relevance of gaming through hardware sales and retail game sales in Japan and increasingly difficult to track said sales in Western markets. The VGC model/formula for sales tracking as it currently exists will likely become obsolete, or at least a poor indicator for actual market performance, particularly in Japan.

No worries, the Switch will save Japan!

It isn't that bad. As you mentioned, Japan gets a bad rep for the simple fact that it has been such a super power when it comes to entertainment revenue (Domestic entertainment, mind you), that once it began to struggle with the economy, the impact seemed bigger than it actually is.

European countries usually get all wrapped in one group/number. Japan usually stands on it's own and outsells the crap out of Europe videogames and music wise. Let me know when France's, Germany's, England's, Italy's, and Russia's music markets reach Japan's level. Then that'll be a red flag.

Japan currently is THE 1# market when it comes to music sales for example, mainly because selling prices are much higher than in USA ( an full album in Japan can cost aroung 40~50 USD and a single easily sells for 10 USD). But if we see the raw numbers it looks like it`s dead. It`s not like it used to be in 80`s/90`s, but still good if we look revenue.

This is why I think that we also need to start to analyze Japan gaming industry as a whole, even if consoles and handelheds are decreasing, mobile may be supplating it very well, and it`s totally valid and should the developers to adapt to the new reality.

It`s just like China, China is one of the biggest markets in the world for gaming, but if we consider consoles and handelheds alone it`s almost non-existent, it`s more a problem of point of view than an actual problem, really.

I, for one, welcome our new AppStore overlords ;)

http://www.zdnet.com/article/apples-app-store-2016-revenue-tops-28-billion-mark-developers-net-20-billion/

It's not that they prefer portable gaming more, but that they prefer gaming on tablets and phones. Sales for dedicated gaming handhelds are retracting as well.

A cultural difference if you ask me