As Western studios like Halo creator Bungie grew more adept at producing high-budget games on high-powered console hardware, Japanese developers struggled to adapt to the last generation; the Xbox 360 failed to make a dent in the country and the PlayStation 3’s inscrutable Cell processor proved difficult to unlock. "Japanese game development is not especially optimal," says Mielke. "They’re lacking certain disciplines and they’re just not super efficient. Western developers were just very comfortable in the environment."

Meanwhile, Japanese consumers remained reluctant to buy into new consoles altogether, with the notable exception of Nintendo’s inexpensive, accessible DS and Wii. The software libraries for both Nintendo systems were far more expansive in Japan than in the West, with developers eager to capitalize on Nintendo’s unique hardware and broader demographic. But while this led to a wealth of innovative Japanese software, few titles were big hits and fewer still made it out of the country. The PSP was another success story in Japan, cementing the country’s preference for portable games, but that was driven by the huge popularity of Capcom’s Monster Hunter franchise, which never caught on in the West. "On the portable side, Japan is the healthiest market in the world, and there are lots of consumers playing games on portable devices because they use it on the train," says Shu Yoshida, president of Sony Worldwide Studios. "So the divided attention from publishers delayed the ramp-up of the PS3 generation compared to the US and Europe."

Tastes changed, too. Mark MacDonald, executive director at Tokyo localization company 8-4, says the industry’s prevailing shift in tone from fantasy worlds to gritty warfare has seen the rest of the world leave Japan behind. "First-person shooters rely on realism, but a lot of Japanese game design comes from a imaginative aesthetic where it’s not just going for straight realism. But that [realism] was kind of what people started to want."

Western games have never been popular in Japan, and as the rise of the console FPS further alienated Japanese consumers, local developers prioritized their home market even more than in the past. "I think most Japanese publishers and developers have realized that, instead of trying to mimic what's popular outside Japan, they should make what they understand culturally and what they can do best," says Yoshida. This is sensible, of course, and can even lead to unpredictable Western successes like From Software’s unforgiving action RPGs Demon’s Souls and Dark Souls. But it’s a vicious circle — Western games grow more and more removed from Japanese consumer tastes, so Japanese companies serve their home market by stopping any attempt to appeal to the rest of the world, and Japan’s global influence continues to decline.

"They should make what they understand culturally and what they can do best."

As the spiritual home of video games, Japan was once the biggest source of the industry’s more far-out concepts, from the pill-popping Pac-Man to the hip-hop dog Parappa the Rapper. The PlayStation 2 in particular played host to a treasure trove of innovative Japanese games, many of which became breakout hits like Shadow of the Colossus and Katamari Damacy. But it’s hard to imagine those on store shelves today. With the cost of development rising and Japan’s triple-A studios unwilling to take major risks, the unbridled diversity of the country’s output isn’t what it once was. That’s not a problem unique to Japan; EA, Ubisoft, and Activision’s relentless drive to make their franchises an annual event is one of the less positive trends of recent years. The West has a secret weapon, though — indie games.

Indie games are one of the best reasons to buy a game console these days. As the first generation of consoles with built-in internet connectivity and storage across the board, the Xbox 360, PlayStation 3, and Wii offered a unique opportunity for developers. For the first time, independent creators had a path to get their games published on consoles for a low price without overheads or retail distribution. And it worked — games like Braid and Journey became not only some of the most innovative titles on their platforms, but some of the most popular.

But Japan hasn’t kept up. Although Sony and Microsoft are courting indie games as major selling points for the PlayStation 4 and Xbox One, there’s almost no Japanese presence so far. It might mystify the many people who count Daisuke Amaya’s seminal Cave Story among the first indie games they ever played, but Japan’s independent scene is nowhere near as advanced as that of the West.

One reason is the relative lack of adoption of digital downloads and other online services in Japan. "Online multiplayer games are way more popular outside Japan, so that doesn't help," says Yoshida. "And the lack of smaller Japanese-developed games doesn’t create the habit in people to visit the PSN store every Tuesday, for example." And, as anyone who’s been to electronics meccas like Akihabara knows, there’s still a strong tradition of building up a physical games collection, and used games in particular remain popular in a country where rentals are banned.

"It’s not like Japanese users can’t get used to downloading games," says Inafune. "It’s sort of a chicken-and-egg problem — will people get used to downloading games because there are good indie games, or will indie-game developers make more games because people are downloading? So I think that if you put the effort in and if you make good indie games, then the users will follow." Yoshida says that Sony is doing its part to support the take-up of digital downloads in Japan by offering three free months of PlayStation Plus with each PS4, as well as a promotion where users can get ¥1000 (about $10) of free store credit by trialling various services.

But another big reason the games aren’t there yet is the country’s notorious work culture. There’s a lot of pressure in Japan to find a long-term job straight out of college, as many companies tend to pick new graduates for the vast majority of their hires; it’s a problem that’s affected Japan’s startup scene as well. "People in Japan are very conservative in choosing where to work," says Yoshida. "So, even if you are young and talented and have some great ideas to make games, when you say, ‘I'm going to start up my own company,’ your parents will say, ‘Why are you doing this? Work for a great company!’"