I think the DS has dramatically changed the composition of Japanese gaming. In some sense, it has everything - epic 2D games, good 3D games, RPGS, and tons of zany creative games the Japanese like. Prior to 2005, the Japanese market had been shrinking since 1997. It seems that after the immense competition between the dying SNES, Saturn, PS1, N64 in 1995 to 1997, that Japanese gaming was moving past it's golden age. However, it now seems Nintendo has interrupted the stagnation and found a way to draw back lapsed gamers and to bring in new gamers. Where would Japan be for gaming if this had not happened?

I suppose this question largely depends on what the alternative is ... Had Nintendo released the "Super Gameboy Advance Ultra" in 2004 that was basically Nintendo's version of the PSP (we can assume that it uses a similar media as the DS, is more powerful than the DS and was sold for the same price as the DS) I suspect the PSP and DS would be neck and neck in Japan each having about 5 Million system sales. On top of that, if Nintendo followed up the Gamecube with the "Super Gamecube" which was similar in performance to the PS3/XBox 360 but was $250 or $300 I suspect that the sales of the PS3 and "Super Gamecube" would be similar and not that much higher than the PS3 is currently sitting.

I completely agree with all Nintendo's rhetoric over the last couple of years - you know, the stuff about the "market stagnating", "players losing interest", "games not being innovative" (etc). If the DS would have been replaced by a GB II (say something like the PSP), the Japanese market would be dead. Take out all those "touch generation" sales, half (or less) sales on PSP titles (to share between both machines). Who knows what would have happened - maybe a bunch of studios would have shut down by now. Probably the only beneficiary would be Sony - the PSP may have taken the market lead?

While the American and European video game markets expanded significantly the Japanese market shrunk post SNES days, and without the DS the best it would be doing right now is staying about even, and more likely continueing to shrink. The DS has single handedly revived the market. And perhapse Nintendo isn't the only beneficiary of this revival, maybe this more tuned gamebase buys Sony systems down the road.

I don't believe there is either any doom in the Japanese industry, nor that too much should be read into the spike. A new generation of products means an atypical spike in hardware sales.