Looking back at the last few years in Japan it appears that the market is trending toward the opposite end of the pendulum it was during Sony's 98' to 04' hey-day in Japan.
Overall, I think it could be divided into 6 periods:
Pre 83' - Arcade dominated
83' to 90' - NES dominated. Easy to play and quirky 2D games emerge. True innovation abounds - so much that had ever been done before in terms of game play.
late 90' to late 94' - Domination of the SNES. RPGs, Platformers, quirky simple to play titles with refined gameplay excel. At the very end of this era, Sony and Sega launch PS1 and Saturn opening up the potential for masterful 2D experiences as gaming enters the prenatal stages of the 3D revolution.
late 94'- late 97' - Virtual Boy and Nintendo 64 are both flops in Japan (especially VB!). Some of the very best 2D games ever made are released to hold over hardcore traditionalists who are on the SNES and Saturn, but when it becomes apparent 2D is largely being abandoned with the rise of 3D hits on PS1 and N64, development patterns shift. This era sees a peak of sorts for software sales as 2D lovers are satisfied with refined game concepts like Pokemon, Yoshi's Island, Super Mario RPG, etc while 3D begins to show off what kind of sales it is capable of by looking realistic (Mario 64) or having engrossing cinematic storyline with tried and true gameplay in 3D (FFVII)
98'-04' - Nintendo's approach is essentailly to move all of its old franchises into 3D, while trying to milk the profit out of them without competition from 3rd parties. Sony's relationships with 3rd parties lead to an explosion of games focused on story telling and realism - Gran Turismo, DDR, Dragon Quest, Final Fantasy are all huge. Nintendo's biggest hit in this period is Pokemon on GB/GBC - while only Mario Kart 64 hits 2.0 million units on the console side. Interestingly, many semi-big hits that are multiplayer centric (for both PS1 and N64) take off in the period - when they hadn't really in previous periods (there are exceptions - like Street Fighter 2) including Smash Brothers, DDR, GT, Mario Party, and others. Despite the huge userbases of the both Playstation consoles, software sales for Japan's top franchises - FF and DQ are in slow decline during this period - perhaps indicating a shriking market, or the increase of pick up and play experiences with the rise of cell phones, Pokemon, and more competitive gaming.
04'-?? (probably 04'-09') - Noting the decline of formerly reliable selling first and third party traditional games, Nintendo launches a device known as the DS which can handle traditional games (NSMB) but also offers titles like Nintendogs and Brain Training in an attempt to recreate an environment of NES/PS1 level innovation in game design. Early on, when DS only offered traditional software, it sold like the the GBA. However, with disruptive software that appealed to women, DS software titles began selling as well as PS2's biggest titles in 2005, and with the launch of the DS lite, the market was showing signs of massive growth. Sony, following the PSX debacle (a Virtual Boy like flop of tech packaged into a console), assumed its momentum would be so strong that it could carry blue ray with it, despite a hefty price tag and the warning signs of the DS's success. With Microsoft's lead in the west and the massive software sales/hardware sales for DS in Japan, developers began to shift resources to prepare for the future. With DS proving simpler titles with scaled back cinematic tendencies would sell very well, Nintendo snapped up DQIX from Sony, and launched Wii immediately with easy to play disruptive titles (Wii Sports/Wii Play) to try to show developers continued market expansion was not only possible but likely. However, eventually the Wii Sports/Nintendogs audience will demand greater sophistication in their type of gameplay as well, which is why this era will likely end in 2-3 years.
Thats my assessment of Japan....
