It was a really long time since I was looking at console sales numbers, but I just came back and noticed that the Switch is outselling the PS5 (it's largest competitor) by a ratio of almost 10:1

Have I missed some stuff in recent years?

Is the PS5 underperforming? Is it in its slow early years?

Has Nintendo gobbled up the entire Japanese console market for the first time since the NES/SNES?
Does that mean there will be a flood of Japanese games for it?

What is going on?

I’m definitely no expert, but I do know that console sales have been on the decline in Japan for quite sometime. They much prefer handheld gaming, which is partly why the Switch is outperforming traditional console sales. It’s also why I don’t think Nintendo will abandon the hybrid form factor going forward.

You missed a lot.

The PS5 is underperforming in Japan. While it isn't really getting enough stock it's software sales have been relative to the hardware installbase historically bad. Worse than any other console's software sales before.
The Switch basically completely dominates the Japanese software market.

I suggest taking a look at the most recent Famitsu thread here or at the Media Create threads on the Installbase forum.
https://www.installbaseforum.com/forums/threads/media-create-sales-week-51-2022-dec-19-dec-25.1281/
There you can get more info from people that are very well educated regarding the Japanese video game market specifically.

Regarding Playstation as a whole in Japan, it has been in decline since the PS3 and has reached an absolute lowpoint in 2021 in terms of hardware and software sales.

Even with the Wii U failing globally, 3DS and onward have proven Nintendo grips Japan with an iron fist. PS4 sold about 0.9 million less in Japan than the PS3, meaning it couldn't crack 10 million.
For over 10 years, Nintendo platforms are on top and that likely won't change again. Sony had their dominance with the PS1 and PS2 and was competitive enough with the PS3 and PSP. But other than that, it's been Nintendo Land over in Japan.
And yeah, a lot of that has to do with the Japanese market enjoying handhelds more than a lot of other markets.

In terms of hardware, the PS5 isn't even selling that poorly. It's certainly not good, but not Xbox levels of low.

Software wise, however, it barely has any presence. The past few years we've had several weeks were the entire Famitsu top 30 was comprised of Switch games.

I mean, handheld gaming has dominated the market for ages now, the PS5 still has supply issues, Sony is prioritizing more and more the western market over the japanese one, the Switch is a one in a lifetime system with stellar titles for many series beloved in Japan, Sony's censorship policies has created a decent amount of bad blood with many devs over there...

The Switch has every reason to be on the lead, while the PS5 has a lot of things keeping it behind.

Yes Nintendo owns Japan now.

Xbox has never been a presence and Playstation has been in decline ever since the PS2 era ended. The Japanese just haven't really cared much for Playstation consoles after PS2.

Japan prefers handhelds which gives Switch a huge advantage. But also most of the mega selling series in Japan are Nintendo titles. The only mega series that isn't Nintendo is Monster Hunter but versions of that series are now also coming on Nintendo, and FF and DQ are still big sellers but DQ is also now on Nintendo and Nintendo is also getting plenty of FF stuff even if it isn't getting the brand new mainline FF series.

Basically Playstation is a side system in Japan now. From a hardware and software perspective what Japan wants is almost entirely on Nintendo alone.

When Nintendo announced the Switch's form-factor, I kind of knew this was going to happen. As mentioned prior, the Japanese public have been prioritizing handheld gaming over home consoles for awhile now. So when Nintendo left the dedicated home console market and consolidated their efforts into a high-end handheld strategy, the writing was on the wall.

Yup. Japan is pretty much just Nintendo at this point.

Nintendo moved ahead in the Japanese market back in the Wii/DS era, but yeah, in the past decade the distance has been accelerating.