The Japanese console market has been seeing a dramatic downward slide for years now, with the previous generation seeing a sharp decline from the glory days of the PlayStation 2, and the new crop of consoles- the Wii U and the PS4- seeing a further contraction still.
The PS4, on its part, was expected to help the ailing Japanese market somewhat. It was widely expected that it would help sales of dedicated games hardware there (currently, the 3DS is the only traditional games system in Japan holding up the forts); however, not only was the PS4 launch dismal, but it fails to have stimulated the Japanese console market at all. In fact, for the last few tracking periods, it has been outsold by the Wii U, not because the Wii U is doing any good, but because the PS4 is doing so awfully.
Currently, the PS4’s lifetime sales figures in Japan stand at just over half a million, with 620,000 units sold; the Wii U more than doubles that with 1.8 million, the Vita is 2.8 million, and the 3DS has a staggering lead of 15.7 million (although it is slowing down as well).
The Japanese games industry is in trouble unless it can find at least one other system to hold up the forts and stimulate interest in dedicated games hardware alongside the 3DS.