Japan isn't against buying American, or European, products. Apple is seeing big success in Japan right now with the iPhone - and that was a market that was entirely dominated by Japanese companies just a few years ago. You just have to have the right product and the right marketing to appeal to Japanese buyers. It's hard to say that Microsoft did that as well as they could have this time around. The early launch of the 360 was plagued with a bunch of issues that stopped them from really just dominating this gen.
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Simplicity is the ultimate sophistication.