I think Japan has American developers beat when it comes to who pushes the technology to it's limits. Actually, that might be an understatement.
I personally, don't care. As long as the game is fun and in English i'm all good. I do like how Japan actually incorporates it's culture and beliefs into their games. The only problem i have Japanese games is that their games never make ay sense. Maybe, i'm saying that wrong. Most Japanese games are fooking insane, mind-warping stories. I like consistency and coherence in my story lines.
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American, or European developers easily push the technology to its limit than Japanese.
Japanese gaming has hit a rut. Outside of Nintendo, and Capcom, who are starting to become more of an American developer anyways the majority of games coming out of Japan seem to be the same thing.
When Square is starting to use the Unreal engine for some of its game, it shows that American's are pushing the limits. Considering some of the best graphics are coming out of Europe and America also shows how those developers are pushing engines.
As of now I think American/European companies have beat out Japanese when it comes to sheer quality and innovation by a pretty significant margin. The only ones that the Japanese still hold a commanding grip on is fighting and maybe plaformers.
Even RPG's, Japan's long standing trademarked genre is being taken over by Americans and Europeans, using new and innovative ways to enhance the genre and move it forward (look no further than Fallout 3 or Fable II, both having infinite more new ideas than any Japanese RPG since FFX).
Think of the best games of the last few years - Bioshock, Fallout 3, The Orange Box, Left 4 Dead, Call of Duty 4, Gears of War, World of Warcraft, Guild Wars, Company of Heroes. All western games.
It's also of course going to depend on who you ask and where they live.
I'm talking about the complete disregard for trying something new and refreshing.. gears created something refreshing.. as lame as halo can be, it brought refreshing elements to the genre..
Diablo series ?
Half-Life / 2 ?
Elderscrolls IV ?
Unreal Series ?
..hell.. Quake III?.. japan cant even MAKE a decent FPS.. let alone spam them
None of these are similar in any way, as opposed to listing FF with Pokemon with even Dissidia.. they're all awesome in their own right.. but they share far too many similar elements..
(I'm actually pissed that dissidia wasnt for a non-portable console.. as I really wanted to see what a versus fighter would be like with the Crisis Core / Dissidia style engine)
japanese have their own market (Fighting / Beat-em-up, and Turn Based RPG).. but when it comes to breaking the barriers.. america is tops, IMO (FPS, RTS, Action-RPG,.. and things like A.I. , Simulations, etc)
thats why I'm glad america has their own console now.. so we dont have to give a damn "what the japanese are into" to determine what gets the "thumbs up" for release here.. crap is annoying as hell..
did you know the eternal champions sequel got canned by sega, "because it would compete with virtua fighter" ?.. gross..
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Japanese have awesome games too like Metal Gear Solid, Resident Evil, Silent Hill, and Steet Fighter. Are any of these games from the side of Japan lame? No (except for that one Silent Hill game called Homecoming).