Making a hybrid makes little sense for Sony. They are a Japanese company but a western developer when it comes to video games so their games won’t appeal to Japanese no matter what. Given the massive profits they’re currently making and the goodwill they’ve accumulated from their games in the west, they should just follow the current path but maybe get 1 or 2 more western studios.

In Japan, they should just concentrate on mobile. They currently have 3 games in the top 25 top grossing apps on iOS in Japan.

I kinda disagree with the bold. Western games is starting to get a foot hold in Japan. COD and GTA are prime examples of this.
Horizon manage to do well in Japan. Uncharted as well. 

Horizon-
Last known data from media create 204,517 (physical) in famitsu the DD sales are over 60K
Horizon already shipped over 500K across Asia (HK, SG, S.Korea and SEA) so the shipped numbers could be between 500K-600K or more.
Imagined how the Sequel for this game will sell in Japan. 

And out of 11 games that have gold awards 7 are from western devs.
https://gematsu.com/2017/11/playstation-awards-2017-winners-announced

Uncharted 4
Last known data I gathered. 170,251 (physical) Famitsu DD sales is 30K
Shipped over 500K including dd sales across Asia.

Last of US remastered shipped over 500K

Even Witcher 3 manage to shipped over 500K across Asia. 
128,414 last known data from MC. This game had an insane legs.

https://gematsu.com/2016/12/playstation-awards-2016-winners-announced

Japan studio needs to focus on games like BloodBourne, Horizon, and Witcher type of games.

Also, As I mentioned on this Thread. Asia is growing the emerging markets for console gaming. I won't be surprised 5-10 years from now. HK, SG, S.Korea and especially SEA will be a strong market rivaling big markets. Sony is not focused in Japan but now more focused in Asia (including Japan).  Even Nintendo is trying to penetrate China. 

As I wrote in other threads, IMVHO next gen Sony will have to partially follow NS example. Partially as it won't have to make a totally hybrid choice, this would damage its sales in its strongest region, EU, but simply including a hybrid version in the range of next gen PS. This will require to launch it not earlier than in 2020, as even the hybrid version will have to consistently outperform base model PS4, when docked, but besides this there won't be other big obsatacles: both PS4 and XBOne use quite lightweight 2012-2013 tech AMD CPU cores, and CPU performance is the only part of performances that must be always delivered almost completely (a minor part is renounceable if there are optional services that can be turned off when undocked), while graphics can be delivered by a mobile GPU or the main APU's GPU greatly downclocked, when undocked. Great leaps made by latest AMD CPUs, GPUs and APUs make this goal easier to achieve, but it will take anyway some more years to allow mobile or ultraportable CPU cores to deliver the desired performance leap too, and some time will be necessary to devise and design the most suitable solution for graphics, either choosing AMD GPU cores that can switch between two quite different performance levels or include both a full performance mid-range GPU and a mobile one without an excessive cost increase. Quite likely, anyway, APUs with such features, just needing minor customisations for consoles, will be made by AMD for entry-level and mid-range desktop replacement laptops that won't need an additional GPU to run at full power when connected to the power grid. RAM and solid state storage won't obviously be a problem.

I feel that the rest of Asia is different from Japan. Console gaming is still growing there unlike Japan where it’s the reverse.

And those software numbers are good by the regular standard of western games in Japan. But there is no reason why Uncharted 4 would only sell 200k in Japan, a country where gaming is supposed to be big. Same thing with Horizon and The Witcher. Sales of western games are disproportionately low.

So making a game set in ancient Japan as a Japanese videogame developer would be more imaginative? There are plenty of Japanese games recently that you wouldnt think were made in Japan unless you see the end credit, Residnet Evil 7, Evil Within 2 for example.

Sorry the Asia part is not for you but for the thread.

2nd part.
Can you name me series that sold or shipped over a million besides Mario, Splatoon, Pokemon, Yokai watch,  FF, DQ, MH and the old RE? Selling over a million in Japan is not an easy feat.  Those game that sell over 1M are God tier. 

Selling 500K in Japan is not an easy feat as well. Those game that reached 500K are mostly establish franchise or popular anime based games in Japan.
Nier Automata sold over 300K  considered great by many. Why can't we say the same thing with Horizon?
Horizon was even chosen in user awards in Playstation awards held by SCEJA. 

GTA 5 over 1m shipped already with 300K sold for the PS4 alone and sold 360K copies when it launch on the PS3 and X360.
COD  WWII reaching 300K physical copies with out DD sales.
Horizon almost 300K with missing data.
Uncharted 200K with missing data
Witcher 3 could be at 200K aswell with mising data.
and the sleeper hit Mineraft which won double platinum awards recently. That's 2 million shipped. It's 1M already in Vita.

The appeal for western games is already there so telling us that there's no appeal for western game in Japan is false. If the game is good it will sell. 

7 Resident Evil games, SSSsooooooo imaginative. Evil Within 2, another horror genre. Mind blowing. Final Fantasy, Bloodborne, and persona is an exception because they try new things.

How many other AAA survial horror games are outthere? You just saw a teaser of Ghost of Tsushima and you already makes some conclusions, the game could be anything

AAA horror games is dying, developers is moving away from making them. Hopefully they're making something more imaginative.

So what your saying is the PS4 wasn't really designed for the Japanese lifestyle?