ok here's my take on this. Working at a Japanese gamedev was a big eye opener for me. From what I saw, they saw numbers of games like Call of Duty and Halo and their jaws dropped. They seem to think they by right deserve those numbers in the west(not understanding that gaming is not THAT mainstream, just those games are) so they begin thinking this is all what westerners want, ignoring their original markets in the west. They begin to "westernize" their titles which previously sold well in the west(not understanding people liked them the way they were, just fix a few gripes, just don't make it another generic game with an known IP slapped on it), going to either third party devs who talk big and are willing to work within their (very low) budget or they open a US studio with the same criteria. They penny pinch and crunch and have idiots who can "talk the talk" run the show until the game is a clusterfuck, while doing so they maintain their "hostile to western devs" attitude while making the game. If the game doesn't get canned by then, they either find a bigger idiot than the previous to ruin the game, get marketing to take over design and direction of the game, or bring in people from japan with their 1980's development ethics into the mix. After doing this for 3-5 bombs, they go skeleton keeping only the biggest assholes, and driving away the good talent(instead of laying them, since they would need to give them severance and such), three years later repeat the cycle again. This isn't gonna end until one of the big boys in japan goes under.
As for JRPGs in general, JRPGS even in japan(save FF and DQ) were predominantly middle ground games. They weren't big budget blockblusters, and they weren't tiny casual games. This gen of consoles took a big steaming shit on the middle ground, games were too expensive to make. The alternative is wii, which isn't friendly to non first party devs, and handhelds which are a totally different market. Some devs like Atlus were smart and figured out how to survive as a middle ground dev, but most of the big boys decided to drop their RPG franchises or attempt to "westernize" them of course in SE's case failing. If you want my opinion on this, the middle ground we know is dead. But someone will take its spot, indie devs. In a few years from now download services will mature and dev tools made available to indie devs will get better. JRPGs will come back, but expect new franchises and new developers to take mantle.
Sounds about right, ties in nicely with Inafune's rants about the fail that is the Japanese game industry.