I think it was more that they looked at their Japan Studios and realized they'd produced basically one home grown hit since Shadow of the Colossus in 2005: 2014's Freedom Wars on the Vita, which naturally only sold significant numbers in Japan. They basically just functioned as a Minna no Golf factory.To Far Away Times wrote:Sony abandoned nearly all Japanese support to chase the sad dad third person story first game that is carefully crafted to win mass market awards. Sometimes it works, like Last of Us 2, but most of the time, these games are insufferable. But it generally feels like they deserve their Japanese support ass kicking.
Their only other big successes were effectively mercenary work like Bloodborne and Demon's Souls, not anything they could produce on their own. Their catalogue is littered with well-intentioned mediocrity like Puppeteer, Tokyo Jungle, Soul Sacrifice and White Knight Chronicles. Their lone meaningful all-internal release in the 2010s was The Last Guardian, which also underperformed.
I'd imagine they also looked at their American developers producing Ghost of Tsushima and making a more successful and better received Japanese game (even in Japan!) than Japan Studios was.
Then they looked at what the Japanese market really was: a bunch of mobile consumers, with (non-Nintendo) hit console games selling 200-300k, while Western-focused titles easily went into the multi-millions.
Then they surveyed the Japanese industry landscape, and saw that they could count on one hand the number of companies who had the scale to really utilize the PS5. They'd be easy enough to support directly.
It seemed really cold and drastic when it was announced, but when you break it down you see that it was them realizing they were throwing money in the wrong direction there, with an industry largely without the manpower to produce the type of title they needed. Polyphony Digital survived, so it was really about the bottom line.
All that being said, yeah, Sony is literally the company that invented the rice cooker, and the PlayStation was the thing that kept them from going under in the 00s. Losing that Japan focus is losing a (big) part of their soul.