Because the odds of its continuing to increase in that region from now until the end of the gen is pretty much over with when GT5 and the two Final Fantasies release exclusively on the PS3 over there.  As they will pump the PS3's install base up to 7 times what the 360's will be at that time, so 95% of developers that want to develop HD games in Japan will be doing so because of the much larger install base of the PS3 in Japan.

The Playstation is going to be getting more Japanese exclusives due to the size of its install base.  Heck, after just one month of its beating the Wii in Japan this already happening.  Former 360 Japanese exclusives like Ninja Gaden II and Tales of Vesperia have been announced to both be coming to the PS3 in the last week in spiffier expanded versions.  And just two weeks after saying that Lost Planet 2 will b e a 360 exclusive, Capcom is refusing to say it won't come to PS3.

No because studios that are making PS3 games in the West like Insomniac and Naughty Dog have proven that they can sell 2 million plus copies of their games in the US and the West while in Japan the one of the most popular games in one of the most popular game series in Japan by one of the most popular Japanese developers fails barely manages to pass 200,000 copies sold in Japan while games like Yakuza 3 and White Knight Chronicles managed to pass 400,000 units sold in Japan on the PS3. 

@BTFeather55, i doubt that the announcements of ninja gaiden and tales of vesperia had anything to do with the recent increase of sales of the ps3.

But should MS back out of Japan, if they lose to much money on them, they should. But if they can reach 2 million with more games and more exclusives they shouldnt.

Japan is a very hard market though, they only want to buy electronics made in their own country. They are much more nationalistic then americans.

so everything said negative about 360 and positive about PS3 on this website is said by SONY fanboy. People like to make theards abot PS3 being the next Dreamcast and count all the reasons why PS3 is failing, but when someone said 360 is doing bad in Japan THAT IS PROBABLY SOME SONY FANBOY TROLLING.

PlayStation brand was very succesfull in USA, so Sony is not gonna pull the all PlayStations out of USA because of 1 bad generatrion.

      I don't know how MS is going to get 2 million there when three of the biggest games coming to Japan in the next year and a half (four if you count Team ICO's upcoming game) are all PS3 exclusives further increasing the PS3's install base over there, big games from huge Japanese companies don't do much to increase the 360's install base there see Tales of Vesperia and Star Ocean only giving the system a pop for at most two weeks then dying off quickly), the 360's biggest Japanese exclusives wind up going to the PS3 in better versions to the point that it's becoming expected for Japanese 360 exclusives to do so, and Japanese games that are on both the 360 and PS3 sell multiple times (2x more for SFIV and 4x more for RE5) than the 360 versions do in Japan.

Here's my take: Japan is irrelevant in a larger sense, now that Britian has passed it. If your going to make a game that's very focused on that market, then the PS3 nor the 360 aren't your best, or remotely close, to a good bet. You'd need to make a game for the Wii/PSP/DS to succeede. Even the PS2 is a better option than either HD system in Japan right now.

Because of those facts, I don't see why MS should pull out of the market. Even if Microsoft stayed in the market only for multi-plat Japanese games, it could still survive thanks to a much lower price point than the PS3. Furthermore, I don't understand why lagging behind by ~2m units means you have to pull out of that market entirely. Lets not forget the larger picture of the Asian region....They are still more Japanese-centric than the rest of us, and the X360 is outperforming the PS3 in South Korea and Taiwan...So it's not just one region, it's 3-4 if you include HK/China.

Considering how Nintendo has done this generation, for anyone on the XBox or Playstation camps to talk smack, like has been see in this thread, and by the OP is irony. The OP will likely make comments like, "Well the PS3 is outselling the Wii in Japan recently, so you can't compare the PS3 being to it, the way the 360 is to the PS3". And if numbes then go down, where the Wii jumps back ahead, then what? WAIT, we can't talk about the PS3 pulling out Japan, because it is a JAPANESE company owning it.

It is in MICROSOFT'S best interest to try to get into Japan and be competitive. It is also in interest of Sony and Nintendo, so that they stay on their toes.  By the way, using BTFeather's logic, then the PS3 shouldn't get Bioshock 2, because the original didn't do well on the PS3.

 You honestly think the Playstation 3 is going to hit 7 million+ consoles by mid next year? That's hilarious! It's not even half of the way there in over 2 years!

Yeah and FFXIII, Versus XIII, Gran Turismo 5, Hideo Kojima's Next Project, and Team ICO's new game aren't out yet either are they?  Not to mention that Ninja Gaiden Sigma 2 and Tales of Vesperia (and The Last Remnant and Star Ocean 4 if they make the switch) aren't out yet finally prompting Japanese gamers to actually buy them.

I don't think 3 million hardware units is a sizable install base, buddy. Especially given the fact there's this other system called the 'Wii' and it's install base is about 2.5 times higher than the PS3

After GT5 and FFXIII release later this year, the PS3's install base will be at 5 million rather than 3 million which will be 5x what the 360's install base is.

Also, the PS3 has beaten the Wii the past four weeks in Japan and its tied it this week.

And similar developers in the West have proven that if they can sell 2 million units in the West on a PS3, they can sell 3 or 4 million on the 360. Your point?

The PS3 has sold 17 million units in the West.  Wetern third-parties aren't going to go on a mass exodus from the PS3 when they have the potential to be able to tap into that large of an audience.  And even if the West there is talk that big Western games like Mass Effect 2 are going to find their way on to the PS3.  Also, the 360 has only had a few games that have shown they have the capability to sell more than 3 million copies.  Games like Uncharted 2 and God of War III will do just about as good or better than any new IP that Microsoft tries to brig out for the rest of this gen in the West unless it's called Gears or Halo.

"Oh, also, WKC is below 340,000...Not 400,000. Yakuza was always huge...#1 and #2 are million sellers, and Y3 is almost out of steam at 450,000."

According to the latest report from Famitsu, Yakuza 3 has sold 460,000 copies and it is still in the Japanese Top 30 while the 360 only managed to sell 3,600 units in Japan this week (1,800 less units than last week) and finds itself once again being outsold by last gen's PS2.  And there are no big 360 games on the horizon in Japan that could conceivably give the system any kind of sales pop.

Oh, btw, I thought this was a 360 discussion? Why has this become a 'PS3 is superior' discussion, BTF?

There is no doubt that all of those Jrpgs on 360 were an utter failure. And it's not just because "The Japanese won't buy an American machine" because look at the Ipod. Heck even in America people won't buy American cars becuase often times they are inferior. RROD and no bluray do not help the arguement that 360 is an investment for into the future.

Now if you live in Japan and you have to choose between some sub par disc swapping uninspired title like Star Ocean 4. Or a Big Budget 50 GB of goodness MEGATON like Final Fantasy 13 the answer is freekin obvious to most people.

And the sick thing is that you know MS money hatted for all these games and I can say with 100% cetianty that those games will sell twice as much on PS3 when the contract is up.

Megadude - Because Eternal Sonata did so much better on PS3 than 360, right?