It would cut into OG sales more than the Lite would.

If Nintendo decides to launch it we can see how it does =]

Yeah but then we're talking about a 3-way instead of a comparison between two hypothetical 2-ways.

This is such a bad take.

Japan is the 2nd biggest market for Sony after the US. Its still incredibly important and the PS4 has pretty much stabilised the decline of home console gaming:

PS2: 21 million
PS3: 10.2 million
PS4: 9.3 million+

N64: 5.5 million
GCN: 4 million
Wii: 12.7 million
WiiU: 3 million

PS4 and PS5 will get more Japanese games than any other console and its because the overseas market is far bigger than the domestic. Every single third party Japanese developer knows this, Capcom, SE, Namco, TK, SEGA....

Its common sense why for timezones one would have

US + South America + EU + Middle East > Asia

The main point is that around 25M sales of physical software on the Vita, and a good chunk of sales that were exclusive on the Playstation ecosystem will no longer be exclusive. Although Playstation 5 is assured AAA support of Japanese 3rd parties a lot of those efforts are focus on oversees audiences. While the AA efforts which are basically the vast majority of physical sales on Vita and a good chunk of 3rd party sales on Playstation 4 will now appear on the Switch, making the environment and competition Playstation 5 is entering far more difficult than what Playstation 4 faced. 

So although the oversee audience is potentially big, a vast majority of these games were never popular oversees, to begin with. Also, AAA games on Playstation 5 in Japan will be hampered by the low audience. This is why you can expect a lot of cross-gen AAA games by 3rd Party Japanese companies. 

So at the moment the best selling PS5 games during the first 7 months of the console on the market have sold at most 50K physically.

Resident Evil: Village is struggling to sell-out its initial physical shipment on the PS5, Demon Souls and Miles Morales are the biggest Sony published efforts and both games are around 50K sales at best. 

For now the only "major" exclusive from a third party for the PS5 is FFVII Remake Integrade everything else is cross-gen Nier Replicant didn't even have a PS5 version. Software sales are going to be worse than X360 during 2005 and 2006 in Japan. 

X360 Top Selling Games 2005-2006

1. Blue Dragon (Microsoft) - 135.240
2. Dead or Alive 4 (Tecmo) - 103.307
3. Ridge Racer 6 (Namco) - 72.129
4. Dead or Alive: Xtreme 2 (Tecmo) - 57.060
5. Dead Rising (Capcom) - 49.978
6. Lost Planet: Extreme Condition (Capcom) - 44.854
7. Ninety-Nine Nights (Microsoft) - 38.019
8. Rumble Roses XX (Konami) - 29.187
9. Project Gotham Racing 3 (Microsoft) - 25.058
10. Culdcept Saga (Bandai Namco) - 23.947

TOTAL: 578.779

Struggling to think of a PS5 game in 2021 that will be able to clear 100K.. 

If you don't believe the current situation will have profound impact on Japanese third party relationships you are kidding yourself. Combined with a lot of senior people leaving Sony Japan and their market share will continue to decline without serious investment. 

Horizon will clear 100k

Horizon Zero Dawn managed 258K physical sales but it launched when the PS4 had a 4.48 million audience. At best Forbidden West is launching on a sub 1 million PS5 audience, with potentially a good portion of sales not even owned by Japanese consumers. Call of Duty is the other candidate but I cant for-certain expect exclusive PS5 games surpassing 100K physical with the current software sales we are seeing. 

Overall we need some big titles from third parties dated at E3 just wonder how many can be as substantial as Resident Evil: Village it's a franchise that in the past managed over 2 million and currently looking to finish under 100K physical sales on the PS5.

On the PS4 Sony bundled Knack which contributed 400K sales, so I guess if they start bundling their biggest exclusives it might help them this year. That's what I think they need to do to actually get some software sales on the system, especially for their partners who are going to have a tough time. 

With the current situation I won't be surprised to see Integrade & Scarlet Nexus launch well below 50K on the PS5

DS - 32.990.000
GameBoy - 32.470.000
3DS - 24.572.610
Switch - 19.947.130

It's looking like in 2022 Switch will surpass 3DS, and by 2025 will becoming the best selling system of all time in Japan,
We just saw the market grow for a third year in a row. Switch Pro is rumored to be launched later this year and since Nintendo themselves say this is the half way point of the console lifecyle it means Switch should remain strong until 2025.

Depending on whether Switch manages to sell over 6.5 million this year, with Splatoon 3 launching in 2022 its likely not to fall below 6.5 million. Meaning that the gap between Switch and DS is less than 4 million at the start of 2023. The Pro will be what will prolong the Switch lifespan in Japan similar to how GameBoy had a longer life than the 3DS/DS due to the GameBoy Color. 

I anticipate Switch successor will come around 2024 at the earliest with a short reveal cycle of less than 6 months. Meaning that even in 2023 we are likely to see strong sales, alowing the Switch to surpass the DS and become the best selling device in Japan of all time. Doing this while being more expensive than DS/GameBoy/3DS is just the proof you need to see to understand that the market is very healthy for everyone supporting the Switch at the moment.

PlayStation is becoming irrelevant in Japan this will also drive further growth as Nintendo is set to gain a lot more franchises that used to be exclusive to the competitors. With over 90% of the market, the future of 90% of third party franchises is pretty clear and Switch is part of it, making PS5 a non-started outside of a niche audience. 

There is a reason why we can look at X360 numbers and not PS Vita or PS3/PS4... software sales is what drives hardware and in Japan PS5 is failing to achieve them

Capcoms and Square Enix's flagship titles will still sell millions worldwide. Software in Japan for non Nintendo consoles will be down, thats been a thing for a while. Fyi RE: Village has already shipped 4M copies WW no idea how much they've sold so far if we factor in digital sales including PC.

The smaller niche titles may very well be affected. The rest.. well is just wishful thinking. There's an audience for Japanese games outside Japan y'know :P

I think that's what most Japanese game fans are worried about, the niche Japanese games leaving PS to be Nintendo exclusive. Some franchises that thrived on PS are now not selling well and are selling more on Switch.