all that extra horsepower won't matter if devs don't use it.
and in japan's case the ps5's specs are overkill for most people

Hardware sales and software sales(Physical) for Japan 2021

NSW - 5 million units
PS5 - 1.3 million units
PS4 - 300K units
XSX/S - 100K units

Top 10 best selling software(physical)

1. Monster Hunter Rise - 3.8 million units
2. New Pokemon Remake - 2.6 million units
3. Animal Crossing New Horizons - 1.5 million units
4. Zelda BOTW 2 - 1.2 million units
5. Momotaro Dentetsu - 1 million units
6. Super Mario 3D World - 950K units
7. RFA 850K units
8. MK8D - 650K units
9. Minecraft - 500K units
10. Super Mario Party 400K units

First, in Japan, real demand of PS5 is still in the dark due to too many resellers include them for China. Especially, last ones makes us difficult to estimate the PS5's market size. Anyway, in Japan, it is said to be half serious that PS5 is sold by people not to play the game but only to resell.

Next, in Japan, it's said that MS isn't motivated for console at all. Basically situation of XBox One Series X is just worse than that of PS5's.　In fact, I haven't never seen XBox series X was sold even in Christmas and New year markets.

Nintendo own is no problem for performance of Switch, but a big problem for third parties. FF and Resident Evil are planed to release for PS5 and won't move to Switch because Switch doesn't have enough performance for their devs. At now, Nintendo has a big market, but it is unsteady as the Wii used to be. A next challenge for more big and stable market is taking in major franchises.

Nintendo doesn't need the big AAA games to succeed, the Switch proves that already. It will get by just fine on games like Monster Hunter Rise/Stories 2, Rune Factory 5, Momotaro, Shin Megami Tensei 5, and an RE game of its own according to the guy who correctly leaked MH Rise. For mid tier Japanese devs, it doesn't make any sense to pursue high end PS5 exclusives when the console will never have as big a base there as the Switch.

the switch is plently powerful enough if you know what you are doing...

but a lot of modern devs get by by brute forcing the issue instead of developing a creative way to design a game around a console's specs.

It's a problem for those who don't want to put their games on Switch, so not an actual problem.

Yep Resident Evil and Final Fantasy becoming irrelevant in Japan isn't a problem Nintendo needs to solve, its up to Square, Capcom, Bandai, Sega etc to treat the market leader properly unless they want to fade into irrelevance in Japan. With very little 3rd Party support Switch had

- the 3rd Best year for a Hardware platform in the history of the Japanese market

- Animal Crossing: New Horizon is already the best selling game of all time in Japan

- Minecraft is the first Western third party game guaranteed to surpass 2 million physical in Japan

- Konami just launched what will end up becoming their best selling game of all time


I don't really see any problems for Nintendo in 2021

Top 10 3rd Party Games PS4/NSW

1. [PS4] Monster Hunter: World (Capcom) - 2.564.928
2. [NSW] Minecraft (Microsoft) - 1.700.000*
3. [PS4] Dragon Quest XI (Square Enix) - 1.368.698
4. [NSW] Momotaro Dentetsu (Konami) - 1.231.207*
5. [PS4] Final Fantasy XV (Square Enix) - 1.042.951
6. [PS4] Final Fantasy VII Remake (Square Enix) - 1.000.000*
7. [PS4] Kingdom Hearts III (Square Enix) - 861.226
8. [PS4] Grand Theft Auto V (Take Two) - 750.000*
9. [NSW] Dragon Quest XI S (Square Enix) - 575.000*
10. [PS4] Monster Hunter: World - Iceborne (Capcom) - 575.000*

*Final Week of the Year Estimation

TOTAL: 11.669.010

PS4 TOTAL: 8.162.803

NSW TOTAL: 3.506.207

Momotaro is going to overtake the PS4 Version of DQXI, and will likely surpass 2 million physical by the time Monster Hunter Rise launches. The game has had an insane debut and there can be no doubt that it will surpass 3 million in Japan eventually. It's basically the biggest break-out since Yo-Kai Watch on the 3DS, wonder how high it can get eventually.

Minecraft will also catch up to Monster Hunter:World by the end of 2021 and continue to sell as long as there are new Switch buyers, doesn't seem the game is losing any popularity as it's probably the most consistent game on the Switch. Every-time there is a big week for the console Minecraft gets a bump, Microsoft definitely made a very strong global acquisition and it continues to pay-off. 

DQXIS legs will probably continue long enough for the game to reach 900K since I don't think Square is revealing XII next year, a spin-off or two are highly likely, I think DQH3, DQB3 or DQM4 would definitely have the potential of surpassing 1 million on the Switch. I don't quite know if Bravely 2 has the same potential, WoM is going to play a key role. So overall I'm not really worried for Square they have enough ability and big franchises to at least match their 3DS output on the Switch.

Their main problem is around PS exclusive franchises. We shall see how things play out for FFXVI, but the hope rests in the West if it's a PS5 exclusive. A PS5 exclusive in Japan in 2021 would mean FFXVI would struggle to sell 300K, Square really need to launch a PS4 version if they want to limit the decline of the franchise in their home land. But even with a PS5/PS4 version, I don't see FFXVI surpassing 800K that's about the maximum ceiling I would give to physical sales. 

Bandai is narrowly missing out on the Top 10 with Taiko and Fishing Spirits.  

• Taiko no Tatsujin: Drum 'n' Fun! (Bandai Namco) - 545.603
• Fishing Spirits: Nintendo Switch Version (Bandai Namco) - 531.828 

Fishing Spirits will continue to sell well into next year, but for Taiko I'm unsure if RAP might impact the legs long-term. 

More importantly for Bandai is the lack of any announcements that could sell beyond 500K, their strategy in 2020 has lead to around 50% decline YoY in Japan. Overall if they continue with the same strategy in 2021, their competitors will fill the void left and they might start facing certain risks on their home market. 

Marvelous are in a marvelous position, they have their first evergreen, Sakuna has alluded by returning to the chart every time there is enough stock for the game. It even returned to the Taiwan Top 5 this is widespread through-out Asia.  Don't be surprised if Sakuna ends up far exceeding the launch sales on the Switch, if the game continues to receive updates and physical stock - I imagine it can eventually sell 1 million in Japan. 

With Olive Town & Rune Factory 5, they are potentially looking at exponential growth in 2021 on the back of just those three games. It's all about execution and WoM, but I've said it before but I really have a strong feeling that Olive Town & Rune Factory 5 can be break-out hits for those respective franchises. Very soon we will turn our focus on the Olive Town, and I won't be surprised if the game has a unprecedented growth. 

One final thing I'm wondering is how Hollow Knight: SilkSong, Human Fall Flat 2 or Overcooked 3 can perform as physical game in Japan published by Nintendo or a Japanese 3rd Party with the needed marketing push. Human Fall Flat is already over 100K physical and probably a million selling franchise in Japan across Switch/PS4. It's insane but indies like TeamCherry have a chance to sell 300K+ in Japan. Overall Nintendo has been pushing indies in Japan and doing the same in the rest of World. Hades hasn't exited the Top 5 in South Korea, Among Us is the Top selling game in Japan etc. When talking about 3rd Party sales indie sales are more important to Nintendo than any single other 3rd Party publisher. By embracing talented creators, that in turn choose to target the platform - Nintendo is developing relationships which will probably stand the test of time for their audience as well. To me SilkSong, Among Us & Hades are the perfect demonstration of the fact. Switch was suddenly & to no one's surprise the de-facto console for those games, yet a lot more is going on behind the scene in the past few years. As I eluded Nintendo changed their approach to smaller creators around 2015-2016 and have been building upon those relationships in the past few years, the titles that resonated the most were also pushed the most within their social media and other marketing actives. In a few years audience in East Asia is more likely to be familiar with Hollow Knight rather than Elden Ring or Bloodborne simply because PlayStation has become irrelevant in the market. 

Overall the Wii U disaster definitely taught Nintendo lessons and the Switch's success has proven how important it is to be the leading platform for Indie content behind only Valve. When we look at the physical charts in Japan this is the major thing we are missing, indies from all over the World have been made popular in places like Japan and Nintendo providing a potential audience of 30 million. This is a fantastic new market which indies didn't have access too before because PCs are not part of everyday life in Japan. Now we see that most of the major indie titles focus on getting localized for multiple languages including Japanese prior to launch. This is a crucial factor in their success and growth and neither Sony, Microsoft or Valve can offer the same opportunities to indie developers. This is why I don't think the lack of Japanese 3rd Party support on the Switch has impacted it negatively.

2021 is the year where we would see both Hardware and 3rd Party Software at it's full potential - so look forward to it, I think we would see multiple 3rd Party games sale above 1 million, Monster Hunter Rise will become the best selling non-Nintendo or Pokemon game of all time and hardware will surpass 2020. 

For a few years now when I thought of Japanese third party titles being PS5 exclusive the main titles that came to mind were FF and Resident Evil.  There might be a couple others I'm forgetting but not many.  Those are the Japanese games that are really popular outside of Japan and also have a huge budget.  There aren't many Japanese titles that really need to be PS5 exclusive and those two aren't even the most important ones.

The most important third party games are Dragon Quest and Monster Hunter.  Monster Hunter Rise, we already know, is going to be Switch exclusive.  Dragon Quest 12 will likely be Switch exclusive (or maybe Switch 2 depending on release date).  If Sony is lucky it will be multiplat, but I think it is more likely to be Nintendo exclusive like DQ9.  And the more important game of the two is Monster Hunter Rise, because we already know it is Switch exclusive.  

The main question Japanese developers have at this point is if they want their games to be Switch exclusive or PS5/Switch multiplat (similar to PS4/Vita multiplat).  The install base on PS5 is just not going to be big enough for a big budget Japanese exclusive.  If they want to make money it's either Switch exclusive or multiplat.  Switch already has a 17m install base, it's still selling strong, and it's going to have MH Rise plus all of Nintendo's first party games (Animal Crossing, Pokemon, etc...).  It should be a no brainer which platform will be more profitable for Japanese games.  In fact, for 2021-2022 I bet we'll see more PS4 exclusives than PS5 exclusives in Japan.  PS5 is just not a viable platform for Japanese exclusives outside of a couple of titles like FF and Resident Evil.