That too, but it wouldn't have been as much of a problem if they hadn't needed to spend billions cleaning up their mess. They were already taking a loss on the system, then they had to take yet another loss because the systems didn't work.
Y'know, it always seemed intuitively obvious to me that Japanese consumers would not be very receptive to any non-Japan-designed console unless it absolutely smashed the domestic offerings. One needn't chalk this up to xenophobia, but consider the advantage enjoyed by US domestic pickup truck manufacturers...
> it always seemed intuitively obvious to me that Japanese consumers would not be very receptive to any non-Japan-designed console unless
You hear people say this a lot, but based on my experience, it's basically bullshit.
Japanese people love non-Japanese stuff, and indeed, being foreign gives a product cachet.
However, they're also fairly different than American consumers. In particular, they're (1) super picky (in a way that Americans really aren't), about quality, but also style, reputation, etc, (2) not so price-conscious, and (3) maybe a bit more reluctant to take a risk on something unknown.
In the case of the PS2/3 vs. the xbox/360, the PS series had a huge name-recognition / familiarity advantage, and better support by Japanese game makers offering popular series. MS tried to prime the pump by pushing some "Japanese style" games heavily (and paid through the nose for prime placement in shops), but if you're a Japanese gamer who experienced the sheer massive volume of domestic content for the PS series, sticking with it seems pretty sure bet. Moreover, the high price of the PS3 was a bit less of an issue than with very price-conscious Americans.
That, and the fact that nobody in Japan wanted to buy one.