I'm actually agreeing with the article here. The biggest innovations from Japan that are doing well are simple "anyone can play" type games. There fun but its like we've jumped back to the late 70s. The real trouble the article doesn't stress but you can read almost anywhere eles is that mainstream gaming is doing rather poorly in Japan. The article cites Okami and alludes to The World Ends With You; hell we might as well throw FFXII in there cause the game did poorly in Japan compared to the rest of the world.
I remember once reading that the most popular game system in Japan was the cell phone, seconded by the Nintendo DS. Simple (and quite a few not so simple) cell phone games are more popular than major console franchises in Japan. My friend feels that Japanese developers have just lost touch with their target audience. I sorta agree. I feel that Japanese developers have done more innovation with their games (like the titles I mentioned above) but it doesn't change the fact that many of these innovative and interesting titles are not doing well in Japan.
Western Developers have improved quite a bit while the most successful Japanese titles have only been doing well cause they stick to a formula with little changes (Mega Man syndrome). The Japanese developers don't like major changes, even when a game does make a drastic change, it doesn't guarantee success. For every RE4, there is a FFXII. Both excellent games that changed many of the traditions of their respective series, but while RE4 was a success, XII wasn't so fortunate despite being one of the most favored reviewed games in Japan. Course I feel RE4 did well cause Capcom had all but run the franchise into the ground by sticking to the same formula. RE0, RE3, and RE:CV are all basically RE2 with a graphic change and a few minor extras. RE4 changed everything up and finally fixed many of the problems the series always had. Yet the irony is that RE5 looks like RE4 with a graphic update and a different setting. The gameplay, for the most part, looks almost identical to RE4.
Zelda:TP for the most part played and felt the same as Wind Waker, Majora's Mask, Ocarina of Time, and Link to the past. Even the Metroid Prime series feels like the same game just tweaked to be better. Hell, most of Nintendo's main line games are basically the same as their 64 incarnations just with minor tweaks. Fighting games are probably the worst offenders when it come to lack of major innovation, next to FPS and Racing Genres of course. I can sorta understand the idea that "if it ain't broke don't fix it" but Capcom and a few other companies have shown that stagnation doesn't help anyone.
I found it interesting how the article says part of Japan's problem is that they don't like to reuse technology or use foreign design engines. Perhaps this is the primary fault that Japanese gaming budgets seem so much bigger.