I really don't think they're unpopular in the West, I just think that the core audience that likes them has never been as big as people imagined it was.

Basically think of Final Fantasy as the Call of Duty of the genre. It generally sells a lot, but most games in the genre have never, and can never expect to, sell as much as that.

but we do see fewer JRPG's these days than we used to, and I think the reason why kind of spirals out of my point above: AAA development is expensive and the Japanese market has kind of shifted more towards handhelds and mobile devices than it used to be. There's certainly still a console market there, but it's hard to make a JRPG with AAA production values and sell enough to make a profit. Even when the name on the cover is Final Fantasy.

There's a reason that there seems to have been a number of higher profile JRPG's coming out on the Wii and DS instead of the PS3 or 360 in the last several years. Selling a few hundred thousand units, or even just tens of thousands, is just more reasonable on those platforms.