As someone mentioned here, the home console market has shrunk considerably in Japan. And when the home console market is so small these days, it's going to be difficult to convince the Japanese gamer to buy more than one console, let alone all 3 home consoles. So while the Xbox 360 has boatloads of Japanese software, they're gonna go with Sony and/or Nintendo anyway because Sony and Nintendo have more and they have more recognizable IPs. The home console market in the west however is the biggest it has ever been. It's because of these reasons why it's usually only the hardcore gamers that are buying 360s in Japan.
I don't blame the Japanese for passing up on the 360 because they'd rather get a PS3 to play Final Fantasy, Gran Turismo, MGS and Hot Shots Golf (yes it's big over there). When you have to compete with major IPs like that, it's hard. But look at how quickly Japan dropped Nintendo for Sony and Sega two generations ago! Nothing is impossible. Nintendo' IPs are absolutely massive and yet the Japanese STILL abandoned them for two generations straight (on home consoles). Just like how no one ever saw Apple overtaking Walkman in Japan coming. These strokes of genius (or just plain luck) happen time to time.
M$ has done a really good job but they aren't doing enough. Sure they are marketing but I don't think their marketing budget over there is really all that big. And M$ should put more effort into investing in new first-party Japanese IPs (as well as Japanese IPs they already own like Lost Odyssey and Blue Dragon) instead of moneyhatting third-party devs to make games for their console. How do you think the Sega Saturn became so popular in Japan? By moneyhatting third-party devs? No. Sega relied heavily on first-party stuff to make the Sega Saturn popular in Japan. The Sega Genesis in Japan was less popular than the Xbox 360 btw. If Sega can improve their fortunes in Japan (the Saturn even managed to beat the Sony Playstation in 1995 over there), I think M$ can improve in the future. Apple beat Sony, Microsoft owns the OS market there. It's already an achievement for M$ to obtain 8.5% of the Japanese current gen home console hardware market and 10.6% of the Japanese current gen home console software market. 8.5% of current gen home consoles and 10.6% of current gen home console software is no joke. I bet you Mac doesn't even have that much market share in the OS market. Or if they do, not much more. M$ should be happy with their performance in Japan and not give up on the market. Next gen, M$ can improve their results even more.