I'm just speculating here why FFVII Remake (Intergrade) and FFVII: Rebirth are selling badly in Japan: I think a reason for it is Tifa. I think her look is very much catered to the taste of western men. I don't think Japan likes her design very much.

I agree with much of what you've said but it still highlights what I'm getting at.  Since the Switch launched, the idea of a stationary home console in Japan is even less desirable.  The Switch has merged handheld and home console into the form factor that Japan clearly prefers.  It's possible that the PS4 wouldn't be faring any better right now than the PS5 is, since you can't expect the traditional Playstation design to compete with the Switch design in this region anymore, which is why I don't think the PS5 will do well at all once Switch 2 arrives.  Now, if Switch 2 were to bomb, then I could see people embracing the PS5 a bit more, as in, the next big thing they were waiting for didn't deliver, so that would change things up.  However, I don't think that's a likely reality, most notably when you factor in what games and IPs are popular in Japan.

This is why I think the Switch continues to sell like it does week-to-week against the PS5.  People are still choosing the old, outdated, highly saturated system with no massive games left that's being succeeded in a year over what is the newer kid on the block that is clearly leading in current sales globally.  It's not that the PS5 is a bad system or that Sony made the wrong kind of console in the grand scheme of things, it's just the wrong kind of console for Japan.

Switch is just from a whole 'nother planet at this point, it's defying all logic and reason.

Nice to see Unicorn Overlord do well also; apparently it was undershipped and they're apologizing for a lack of stock: https://www.siliconera.com/unicorn-overlord-physical-copies-sold-out-at-retail-in-japan/

Most likely, the pre-orders weren't strong enough but the marketing and the demo made more people but it on the spot which they probably haven't thought of lol.

Not the first it's happening on Switch. 

Thats not the problem, the problem is no one really knows what final fantasy is apart from hardcore gamers and people over 30. 

It's sorta worrying that we haven't heard anything from Square Enix yet regarding Rebirth's sales worldwide. They made their first report of worldwide sales of Remake around a week after it launched. Same with XVI.

In regards to Japan, its an interesting time for Final Fantasy and Square Enix. For all the hype and praise for XVI and VII Rebirth, to see these games end up selling below their predecessors in Japan is unfortunate. Think of this way, The Legend of Zelda, which has long been considered a contemporary to Final Fantasy, sold pretty well in Japan. However, Zelda did not sell like Final Fantasy in Japan back then, especially in its prime years. Heck, when Famitsu released a top 100 all-time list of the  readers' favorite games, Zelda only had Ocarina of Time in the top 10 (at number 10) while Square had multiple Final Fantasy and Dragon Quest games in the top 10. Now, we see Breath of the Wild and Tears of the Kingdom start a renaissance for the Zelda franchise in Japan (and worldwide) while Final Fantasy has fallen behind and lost its status as that must have game in Japan. Square's move from Nintendo's partnership to Sony's was monumental in the gaming industry. It now feels like a lifetime ago..

Famitsu Japan's 100 favorite video games | Video Game Sales Wiki | Fandom

Thinking of it, Zelda was in a worse situation than FF some 8-10 years ago. From OoT to SS barely breaking 3 million in the worldwide successful Wii and the mobile titles more or less flopping. SE needs to find their MHW/BOTW for the franchise (unless you consider 14 to be it already, but it's so different from the main games to be its own thing).

The success of 14 also hasn't transferred over to later releases in the way that MHW or BOTW greatly raised the sales baseline for those that followed.

Whatever path Square decide to take with FF going forwards, they're going to have to change up their strategy if they want to reverse their decline in Japan.

I'm one of the people that played Remake (PS4), but decided against playing Rebirth.

First of all I don't have a PS5 (yet), but this game was not going to push me to get one, because my experiences with Remake.

It's not the story, pacing or filler that turned me off Remake. I could live with all of that and to be honest enjoyed most of it. I had a problem with the combat and I know this is a hot take.

For me game play, so also combat, needs to be intuitive and clear in it's presentation. But with Remake I felt like I need chameleon eyes, able to move them independently from each other.
There is the action and movement you perform with your main character, a menu to the right with different bars (hard to read thin lines, instead of big fat easy to see from the corner of your eye), a menu with submenu's on the left to perform actions, while at the same time button smashing and dodging, keeping track of 3 characters while being bombarded with numbers on screen. Half the time I did not know what was going on. If things got heated, I never felt comfortable playing the game.

I know that there are many that complemented Remake's battle system, so I accept that I'm in a minority here, but to win Me back, FF needs to simplify some stuff instead of making it more complicated and intimidating to play.

Actually feel the same way, I'm not a big RPG player though so I don't know if this is the new normal or what, but even several hours of playing ... the combat just feels weird to me, I feel like I'm just constantly button mashing and spamming one or two buttons, pausing the battle to heal or spell cast or go into a special attack, there's a bunch of crazy stuff happening on screen but I don't feel like I'm really understanding all of what is happening, lol. 

I'm surprised so many people praise this, lol, I honestly prefer the old turn based system. 

But I could tolerate this, it's more the padding and things being stretched out (vaccuming mako ... really Square?) that are more of a turn off. 

Honestly think too that Sakaguchi was the real genius behind Final Fantasy, Nomura doesn't have it.