If anyone's been following the industry over the past couple of years, you might have noticed a trend of seeming depression among Japanese game designers over the "rise" of "Western" (or rather non-Japanese) game design.
Capcom's Jun Takeuchi spoke of the rise of western gaming, Hideo Kojima is a well-known fanboy of western design, and Platinum Games honcho Atsushi Inaba went so far as to claim that western developers are superior. What's with that?
In order to address the issue, we should find out what the real question behind this group depression, the better to find its roots.
I think that the real question here isn't so much "Are Western games/developers superior?" but rather "Are Japanese games/developers inferior?"
So, are Japanese games inferior?
Of course not.
Again, we have to look further. Why would they (or we) ask such a question in the first place?
Let's look at history. Japanese devs have pretty much ruled the console roost for perhaps fifteen years, at least. In every place but the PC, the Japanese owned the platforms, led the development, and as such, held the advantage. What changed?
The environment changed. With the advent of the current generation of consoles, technology reached parity with the best PC gaming had to offer, and developers who grew up making PC titles, many of them western, found it even easier to bring their design philosophies over to the Japanese-dominated console field. The console warrior within me rages a little as I say this, but the Xbox helped a great deal with that.
As Gabe Newell said, the PC is still the most widespread gaming-ready platform in the world. That in mind, there were far more people with a computer than a console, and most players (thanks in part to piracy) grew up with PC designs, designs which emphasized open-ended gameplay, internet multiplayer, real-time action, and among other things (for better or worse), the first-person perspective.
The global market has expanded, and with it, the proportion of people whose tastes were more western than Japanese. Even today many Japanese games are designed with Japanese customers and tastes in mind. This is why so many of the developers who've voiced these concerns are worried about "reaching out" to the global market.
What does this mean? Are Japanese devs in a death spiral, a creative rut that will cause ever more insular design, until their industry implodes? Have they been passed by? Hardly.
There are a bunch of factors that are contributing to this perception, least among them the fact that we can't see the dregs of Japanese gaming development as easily as we see our own, and vice-versa. For every me-too grey-brown FPS and Imagine title we see, Japanese devs see a flood of poorly-written visual novels with little chance outside Japan and yet another bullet hell Shmup.
And of course, sales success is always a scene-stealer. Western designs have been selling better, their markets expanded. The Japanese have been somewhat slow to embrace online, social play has also stymied design evolution (though that's changing). This negativity is, at least in part, an overreaction of sorts to the end of Japanese market dominance.
Where does this leave our beloved Nippon? Should we be worried? Is Japanese design really inferior?
I don't think there's too much cause for concern. Japan is still home to many great game auteurs. I can't imagine a western publisher greenlighting something as crazy as Noby Noby BOY, or approving the schizophrenic diversions and disjointedness of games like Yakuza and Metal Gear Solid.
No one makes a better jRPG than the Japanese of course, and even there we're seeing adaptation. Atlus made Persona 3, a jRPG that, defies many long-held of the jRPG conventions. Even Final Fantasy XII, whose brand name practically signifies the kind of franchise-fatigue many concerned devs were complaining about, involves western-inspired mechanics that help make the experience both fresh and familiar.
Stylistic contrasts abound in games like Valkyria Chronicles, Odin Sphere, Ico, and GrimGrimoiree, and who can forget the works of Suda51?
Let's also not ignore that thousand-pound gorilla in the room, the Wii, and a damned large proportion of everything on it. Seriously.
So yeah, the landscape has changed, but our favorite bow-shaped archipelago, full of weird games, weird snacks, and weird porn, is in no danger of leaving us just yet.