I too have been concerned that Japanese video games have been getting less attention, like Dragon Quest 9, which didn't seem to get much press coverage on G4 or at E3 this year. Still, I have to disagree on the idea that the Japanese Video game is going to disappear.
After the fall of Atari and other similar gaming consoles, the video game market was all but dead in America. It was the release of the NES that brought video games back - and the Japanese Video game, translated and shipped over to America, accounted for the majority of video games we all played. American companies certainly began popping up and making their own games again - but for all intense and purposes the Japanese-Originated video game reigned in the market place.
Fast forward to 2010 and Video Games have become a more lucrative market that even movies - with American video game developers having not only caught up with Japan, but having surpassed them.
But, as far as I see it - the video game field between East vs West has only been balanced, with both sides having the same skill and imagination to create great video games.
Also, while favorites of mine like Dragon Quest might not be getting the coverage it deserves - that doesn't mean Japanese video games have been ignored. Metal Gear Solid has been one of the most celebrated video game franchises of this last decade. Square-Enix has likewise gotten tremendous fame for the Final Fantasy series - with an army of Final Fantasy-Wannbe games flowing in it's wake.
Inafune points to Capcom as being one of the bigger Japanese developers that have not given up hope - and we certainly have not been ignoring them. Marvel vs Capcom 3 has been highly anticipated, with the likes of Resident Evil, Rising Dead, Lost Planet, Okami, Street Fighter, and Mega Man which are still enjoyed and snatched up by fans with every release. Even one of the most mind bending Japanese video games, Tatsunoko vs Capcom, released and was a hit, despite many people's expectations. Most people didn't even know who the Tatsunoko characters where - but enjoyed it, despite that, because it was simply a good game.
And, beyond Capcom, I recall a certain Japanese Game company all but stealing E3 this year: Nintendo. All the quintessential gaming franchises from Nintendo are all from Japan - even Mario, the Italian Plumber.
I think the biggest challenge the Japanese video game market faces is having to try and appeal more to a world wide audience. The over dependance on Anime-Style characters, and formulaic Japanese RPGs, could perhaps be holding some games back in gaining more global acceptance. Shooters, also, are not as popular in Japan as they are in the west. But, on the reverse side, I'd hate to see the Japanese gaming market change to our tastes - as it's their innovation and style that hooked us, all those many years ago, on the NES. You just can't find more original games than those coming out from Japan.