This is really just part of the larger death of set-top consoles in Japan altogether. Remember, even the "successful" PS3 has only sold ~7 million units to date; a much, much slower rate than the PS2. Even if you factor in 100% of Wii users as "previous PS2 users", IIRC something like ten million console players have simply disappeared in a puff of smoke. More realistically it's closer to 15mil+.
It's a message I got from our Japanese partners as I talked Biz with them this week, during and after Comiket - the situation in Japan is kind of the inverse of the one in the U.S. and Europe. The trend has been toward mobile devices, not just phones but portable game devices, because Japanese consumers typically don't have a heap of room in their homes and it becomes a question of "why would I buy a big bulky gaming box that I have to tether to my TV when I can own a portable device that plays games that are essentially as good?" The one-two punch of the 15,000 yen 3DS and the Vita (which also might now be 20k or under) is really going to finish off the current consoles; if the Vita can push more-or-less PS3-like graphics, literally nobody in Japan is going to give a shit about the PS3.
The 360 never had a hope of success in Japan - not "just" because of the Foreign Console thing, but because consoles are rapidly becoming Not A Thing there any longer.