Company has no intention of pulling out of Japan
The rumors that many tech retailers are either pulling the Xbox 360 or reducing the amount of shelf space devoted to the console has triggered rumors that Microsoft was giving up on the Japanese market.
These rumors are false; despite the challenges, Microsoft says that they have no intention of pulling out of Japan and the company plans to continue working on this challenging market. A significant part of the challenge in Japan is that they are up against very stiff competition there, since Sony and Nintendo both have the home court advantage so to speak.
Microsoft apparently plans to push Kinect in Japan and see if they can make any head way. A number of Japanese releases are still in the pipeline for the console, including the new Steel Battalion title that uses Kinect, which Microsoft is hopeful will be very successful in Japan.