It's the games, period, and I'm sure M$ knows that, which is why they've spent so much effort wooing Japanese developers. If the next Final Fantasy, God of War, Devil May Cry etc were 360 exxclusives then they'd shift consoles in Japan.
Japanese gamers seem to like Japanese games - and there just aren't any compelling Japanese games on the 360. And if you've played a representative sample of each platform's games catalogue you'll know what I mean - Japanese games are _different_ to Western ones, the same way that Japanese movies / cartoons etc are different, they not only have their own style but their own values and culture and history - none of which you get from Western games.
Personally I can't stand a lot of these games, so I can appreciate that gamers used to them may not like the types of 'muscle' games that I do like. There are a lot of Japanese games I do like also - and for those again there's just nothing similar on M$'s platform; take Bemani, there's maybe a dozen music / rhythm games on M$ platform, while there are probably hundreds for PS2/3/P, and innovative games like Rez, Katamari, GitarooMan etc etc - while I love FPS and driving games it would be nice to have some of these 'oddities' available without having to buy Sony hardware.