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Source: PlayStation.com

The latest Japanese sales numbers from Media Create are in , and things continue to look dismal across the traditional gaming industry. Nintendo's (NASDAQOTH:NTDOY) Mario Kart 8 reclaimed the top spot on the weekly software charts, but the company is still seeing disappointing hardware numbers. Meanwhile, Sony's (NYSE:SNE) PS Vita got a small sales bump over the previous week thanks to a couple new software releases, but PlayStation 4 continues to be a major underperformer. Where is the Japanese gaming industry headed?

Nintendo needs to inject life into 3DS
The most recently reported Japanese sales week saw Nintendo's 3DS move approximately 27,000 units. This performance was enough to earn the top spot on the hardware charts, nearly doubling the sales of its closest competitor the PS Vita, but also indicative of platform decline. Looking at year-to-date figures, the 3DS has sold approximately 1 million units in 2014 compared to approximately 1.84 million units across the same period in 2013.

Declining 3DS business represents a huge risk for Nintendo, and the company's stated projections for its handheld appear overly optimistic. The 3DS sold 12.24 million units globally in Nintendo's last fiscal year, far short of the initially projected 18 million unit sales. This year has Nintendo targeting 12 million 3DS sales, but performance erosion is substantial when stacked against the previous year. The 3DS is central to Nintendo's goal of returning to profitability, but the platform looks to fall short unless an attractive new model or price cut is introduced.

Mario Kart 8 can't give Wii U enough boost
On the Wii U side, Nintendo has scored an undeniable hit with Mario Kart 8. The game is on track to be the best selling console game in Japan this year, but the fact that it hasn't more significantly improved Wii U sales is telling.

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Source: Nintendo.com

Waning interest in the platform can be observed by comparing the effects of Pikmin 3 and Mario Kart 8 on hardware sales. In the first week that the most recent Pikmin game was on the market, Wii U hardware sales hit approximately 21,000 units. Mario Kart 8's first week drove Wii U hardware sales to approximately 19,000 units. Pikmin 3's release also created a more sustained hardware bump, despite the fact that "Mario Kart" is the bigger series. The newest game in the mascot racing franchise is selling to Nintendo's core audience, but it's not doing enough to entice the broader field.

PS Vita continues to disappoint
Sony's PS Vita took second place in this week's hardware charts, selling approximately 15,000 units in the period. Vita sales year-to-date stand at approximately 609,000 units, while 2013 had the system at approximately 496,000 units sold. The increase in momentum is not enough to put the platform on a healthy trajectory, and Sony appears ready to mostly write the system off. Recent comments President of World Wide Studios Shuhei Yoshida suggest that indie games and smaller third-party titles will define the platform going forward.

PS4's software saviors are missing in action
Sales of PlayStation 4 continue to track at dismal levels. Media Create's data has Sony's most recent system selling approximately 8,400 units in the last week, and lifetime Japanese sales at approximately 606,000 units. The PlayStation 4's Japanese outlook appears even more dismal coming out of E3. Kingdom Hearts 3 and Final Fantasy XV, big hitters from Square Enix, are viewed as some of the only games with the ability to energize the system in the territory, but both were absent from the industry's biggest trade show. The fact that neither title was shown suggests that both games are a long way off, and may not be ready until 2016.

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Source: KingdomHearts.com

Foolish final thoughts...
The age of the traditional gaming industry is drawing to a close in Japan. The ubiquity of smartphones and the emergence of mobile players such as Nexon, Tencent, and GungHo has drastically reshaped the market and hampered the appeal of dedicated gaming devices. Without an innovative hardware hook and breakthrough software, there's little reason to believe that Sony and Nintendo will be able to match their previous successes in the territory.

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Keith Noonan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.