From last E3: Capcom says Japan doesn't matter anymore

[A Black Falcon]

Nintendo disagrees. They still focus on Japan, who admittedly aren't buying as many games as we are. That's why Nintendo's being focusing so much on innovating entirely new sorts of games and ways to play them. The entire focus has been "we need to get a new audience before things really start to suck".

Actually, Nintendo doesn't really disagree... they are focusing on Japan, but not with traditional games. They are focusing on its casual and nongamer markets... but Capcom wants to continue to make traditional games, and they see the increasing importance of catching the world market while, Nintendo's casual revolution aside, Japan's gaming market declines... the two companies just have different answers to the same problem.

Square-Enix isn't feeling the hurt yet, because RPGs are the one genre that can be relied on to do well in Japan, but Capcom? Action games and stuff? You can see why their focus is divided...