Cause and affect. There's a metric shit ton of games being produced for the DS, although i'm not too sure about the PSP in Japan (assume it is healthier than the west though). At this point you have to ask, are gamers buying these portable systems purely because they are portable, or due to the fact there is an abundance of software available for the systems. Japanese developers are feeling the burn of HD development and seem to be falling behind the west in an industry they once dominated and are moving towards the handheld markets in order to save costs and remain profitable.
How do you reverse this situation in favour of home consoles once more? Is it even possible this generation for even the mighty Wii to defeat the DS, these are important questions and ones which only a company like Nintendo have a chance in hell of solving.