From CNET:

The latest report from CESA (Computer Entertainment Supplier's Association) has revealed that the video game market in Japan has continued to decline for the third year in a row. According to CESA, 2003 revenues driven by the video game industry dropped by 11 percent to 446.3 billion yen ($4.14 billion). Both hardware sales and software sales were off from 2002 figures. The size of the video game market in 2003 was about 60 percent of what it was back during its peak in 1997, reports CESA.

The hardware market was down by 16.7 percent, accounting for 137.2 billion yen ($1.3 billion) of the total video game market. Slumping hardware sales are attributed to slowing PlayStation 2 sales, according to CESA. While increased GameCube and GBA sales contributed to the overall hardware marketplace, those sales alone could not make up for the decline in PS2 sales.

Sales of game software accounted for the remaining 309.1 billion yen ($2.87 billion) in revenues, which was down 8.2 percent from the previous year. While the number of units sold in 2003 changed little, less expensive games (including budget reissues for the PS2) and lower-priced GBA games have taken over a good percentage of sales, driving the market's revenue figure down.

Total hardware and software shipments, including exports, in 2003 amounted to 1.134 trillion yen ($10.52 billion), a 10.1 percent decline from 2002.

Do you think that this signals a slowdown in the U.S. and the rest of the gaming world?

I think the opposite is happening in the rest of the gaming world. I was reading an article in the newspaper about how the gaming industry in Australia earns more money than the music or movie and how growth in this area has quadroupled since five years ago.

I went game shopping yesterday at my local EB and was suprised at the diversity of people there. Seriously, more than half the people in the store were girls of all ages from young teenagers to adults. The diversity of guys was astounding too. It used to just be pimply teenage boys youd see in a game store, but yesterday there were guys of all ages and types. I saw one biker guy with tatoos all across his arms and neck, dressed in leather, getting all excited as he bought up Xbox games.

Besides, trends in Japan are rarely mimicked anywhere else in the world.

Think about it, the biggest titles coming out are American made. Half-Life 2, Halo 2, GTA:SA, even Metroid Prime 2 is made by US based Retro Studios...

For once the gaming industry is shifting away from Japan and to the United States! Talk about bizzaro world. Japan is also not quite as fond as some of the same games westerners are, I'm particularily talking about first person shooters.