Japan makes up around 30% of the market, so even if you win the other 2 regions then you will still not come 1st. Japan is in a huge gaming boom started by the DS and is rapidly catching the US market numbers.

Fact is that everyone console that has won a generation, won Japan. This is actually the fact with most technologies.

Depends on what you want. If MS is looking at a marginally increase in it's market and 2nd place worldwide, no. The PS3 isn't doing anywhere near good enough or consistent enough to overcome the difference in NA and EU.

 I lived in Japan at the beginning of when Japan was going crazy for MD's and MD players. Look at how that turned out. Not every technology needs Japan to succeed.

If it is to stay ahead of the PS3 by the end of next year it is kinda going to need Japan, and Europe for that matter. The console basically sells 300k a year over their. That means that its sells less in 12 months there than it does in one week in december in America. It is the only console in which this happens, and that is a big problem. Even with the PS3 selling like a 20 dollars sack of shit, it will still do better than that by about a 7 to 1 ration as of right now. This is a huge problem because it is basically 1 to 1 in the US and EU is a little more towards the PS3. So basically It comes down to the 360 has to have Japan other wise it is trying to sell to 2 out of 3 markets, and with that it has no chance.

The Wii was purposely left out as it is kicking ass right now and not even worth comparing it against the other to.

For some reason I feel like playing Fight Night after reading this....

Microsoft needs more sales in Japan, as it will woo top tier, and middle tier companies to ensure that their major Japanese games are supported on the X360, if the X360 had decent (1m+) sales in Japan, and very good (15m+) unit base outside of Japan.

Yes, Microsoft has Capcom because Capcom has traditionally done very well outside Japan. However, Microsoft also needs Square-Enix (a company that has done little to support the X360), Namco-Bandai (which they have), Konami (which they have only mediocre support), Sega (little support outside of multiport games), and that's about it. No Atlus, Hudson, IE Institute, very little Konami, Banpresto, ect. There's very little support for middle-tier software companies like those, since the majority of their sales take place in Japan. Microsoft needs those, as if they had those, sales would be phenominal (atleast compared to the Xbox. Sales would still be below Wii, but could rival PS3).

So in the grand scheme of things, MS needs Japanese developers. They're the gateway into good Japanese sales, and Japanese games have a better effect in Europe, so J-games are good for Europe too.

Does the 360 need Japan?!

- To end up 1st place overall in sales?! Yes. Definitely.

- To end up as a healthy system in the 20-35 million hardware sales?! No.

 I second that.....^^

of course they need japan...

Depends on how you define "need".
MS keep losing huge piles of money on their XBox business, but they don't care, cause they obviously have infinite amounts of money to spend. The only explanation I can think of for their ongoing commitment to the video game business is this: XBox is just a giant image campaign for MS, and it works - millions of young people LOVE Microsoft, which was unthinkable 10 years ago (I know, I've said that before).
Back to your question: Every normal company would desperately need to be successful in the japanese market, but MS doesn't.

@ StarcraftManiac: "healthy system"? Yeah, 20-35 million units sold is a healthy number. But losing billions of dollars in the process is not healthy, and would probably cause a company like Nintendo to go bankrupt.