Maybe it's a bad question but, was Japan going to handheld japaneses' fault or markets fault? It may be a weird question, but if you think about it early in the generation there was:
A) A home-console with weird motion controls (the Wii) that was succesful. But most small to mid developers won't be afraid of investigating how to use them properly.
B) A home-console (X360) from America whose predecessor sold 500k. Moreover, they started the gen moneyhating / coofunding / funding some JRPGs projects. Most of them ended in Sony's console, but one year late (like Star Ocean, Eternal Sonata, Tales of Vesperia...). It has to be very confusing.
C) A home-console (PS3) whose price was a rip off. Moreover, some of their succesful franchises and some mid to high profile JRPGs where in Microsoft's console. And some where exclusively in the Xbox for 1 to 2 years.
If I was a Japanese I would probably feel confused and asking: why is the Xbox receiving so many titles I want? Why the only "cool" JRPG for Sony is Folklore?
And after that, I see the handheld market. There is the NDS with lots of awesome games, both casual and hardcore. There I can play SMT, M64, Pokemon, Zelda, Fire Emblem, Tales of, Final Fantasy, Dragon Quest... and there are a couple of cool casual games like Brain Training, Nintendogs, Cats and a lot more.
And there is the PSP which was like a PS1.5 and where you can play Monster Hunter, more SMT games, lots of JRPGs, SRPGs, visual novels, lots of games based in succesful shows...
Looking back at 2006 I feel I would end playing portable too if I was japanese. I don't know when most of the games numbered where released, but I think you understand the point even if some games where published later.