Do you think non-casuals make their decisions based on the country of origin?

The problem is the cultural divide between most western and japanese games/gamers. Nintendo and some Japanese countries are able to cross the divide, few western companies are.

nope, thats why Nintendo games are huge in the US.

The main problem with western games in Japan is that they're marketed horribly.

Look at the Crash Bandicoot games on the PS1. They sold very well in Japan (Crash 2 selling well over 1 million in Japan), yet they were developed by a western company. So what's the deal? The problem is that western developers try to take western games and push them with western-style marketing...in Japan.

While I would love to see Japanese gamers be more diverse in their game tastes, the solution for western developers is simple: Make your game have Japanese appeal.

What did I tell you about making stuff up?

Also, that mentality makes it extra hard on companies.  Japan is, in proportion to the rest of the world marketshare-wise, shrinking.  So, with that mentality, the end result is trying to cater to the Japanese market means less revenues than if they also liked games from outside of Japan.  To have a bigotted attitude that your culture is the only culture worthwhile makes it harder to produce AAA quality titles for that culture, if that culture isn't near the top.

Sounds messed up when the majority of big money maker games are western made not japanese. They should give it a try atleast. Probably another reason for low sales for Xbox 360 in Japan as well despite Microsoft pushing alot of jrpg's on the system. I think it's true but just my opinion on the matter.

Also...

Katamari, Street Fighter, Pac Man, Mario, SNK fighting games, Virtua Fighter, and....

I will let others list them, because they are there. 

all the timeless classics are made where?

lets see.. SoTC ? Japan , MGS ? Japan , Castlevania ? Japan , Zelda ? Japan. Mario ? Japan.

which of the games you listed will be remembered 10 years from now? MW2 ? no , they will release MW12 by then, AC 2 ? no its pretty forgetable actually , GoW 3 ? nope, Splinter Cell? Get outta here seriously,  Halo 3 ? nope , Gears? not a chance.

Heavy Rain MIGHT be a classic game because its very different and it have the chance of being up there with other Western classics such as Out Of This World and Elder Scrolls.

and its funny how you have GT5 in there.

Final Fantasy, Shin Megami Tensei, Metal Gear Solid, GT5 (Its a japanese game), Mario, Pokemon, Devil May Cry, Ninja Gaiden and the greatest game of all time Xenogears.

Japanese games >>>>>>>>>>>> Western games

Their loss I guess. It's absurd to discount a game just by the color of the passport of the guy making it, even where is games that are almost the exact same thing and find success just because the developer is Japanese. I guess that's why their market is shrinking and I think the UK market was bigger than Japan in 2008.