To my understanding the Japanese Developers fail to utilize engines like Unreal and others and continue to build their own. That I think is changing but FFXIII is a great example of a game that blew years and a lot of money on its own Engine instead of picking up Source, Unreal, IDTech 4 or something else. It would be one thing if Square started to sell its engine to others for use but to my understanding they don't and they don't even use it in house for all of their games.

I also think the divide is a bit too cultural as well. America likes big dumb action movies. We want to be Arnold and spit out some one liners. I also think so of the biggest games now are ones that are very ingrained in our culture from Grand Theft Auto (Gangster movies like the Godfather and Scarface), big dumb action (Modern Warfare), or some sort of Fantasy/Sci Fi RPG that is more like the tabletop variety (Elder Scrolls, Fallout).

I am not saying that Japan can't make these sorts of games well but when it isn't your culture there is something that seems out of place if you try to mimic it. That difference gets sniffed out and set as off putting. Probably the best thing they can do is just be themselves but not to an off putting weird extent...I guess.