Microsoft told dev it didn't need Japanese games?

Here's a very interesting little bit of gossip. According to 1UP's interview with Game Republic president Yoshiki Okamoto, Microsoft once snubbed the Folklore studio over a proposed Xbox 360 game by claiming that it didn't need games for the Japanese market anymore.

Game Republic was working on an online title exclusively for the Xbox 360. However, the game was eventually scrapped after MS kindly decided to pull the plug. Okamoto explains why:

"In the beginning, Microsoft was funding it, so we developed it up to a point and showed it to them. They said they didn't really like it that much. After that, we continued to develop the game with our own money for nine more months, thinking that they'd come around, but when we showed it to Microsoft again, they said they didn't need titles for the Japanese market any more. That's why the game ultimately got canceled."

Oh really? Microsoft didn't need Japanese titles, did it? Can it be explained then, why it took a 360-exclusive Japanese RPG in Tales of Vesperia to see the console gain any ground in Japan? Is the revelation of a Final Fantasy XIII release on the 360 something that Microsoft feels isn't important? Funny how quickly MS' attitude seems to have changed now that it's realized the only way to sell an Xbox 360 in Japan is with a Japanese game from a Japanese franchise.