Hey if Iwata's naive assumption that Western gamers prefer Western games inspires him to make Cafe attractive to Western third parties, then I'm all for it.
One thing I've noticed is that the REALLY long running videogame series are generally Japanese. So maybe we're just tired of playing Mario and Final Fantasy games like we've been doing for over 20 years. Yeah Activision will milk the **** out of Guitar Hero to the point that it becomes annoying, but then they just cut it off like that when it no longer was popular. The big Western franchises right now are not that old. We're not still playing Impossible Mission. We seem to get something milked pretty hard but for a short period of time. So while Nintendo is giving us one Mario platformer on the Gamecube, Naughty Dog released an entire TRILOGY of Jak and Daxter games on the PS2. It seemed like overkill to me to have three games in one generation. But we don't see Naughty Dog making Jak games right now. They're making Uncharted games. They milked one franchise and have now started another.
Halo is only in its second console generation. Same with God of War and Call of Duty. GTA is in the third but it has only been a big hit for two. Gears of War is new this gen. So is Bioshock. Yeah franchises get milked as hard as anything in Japan but they seem to fit in new stuff quite a lot in between and franchises die out while new ones take their place. It works well with different generations of gamers who identify and grow up with different franchises then their parents did.
Now Japan introduces new stuff, too. But they are still cranking out Mario, Mega Man, Sonic, Final Fantasy, etc. decades running. And even while some of those maintain a good level of quality the younger gamers don't connect with them. Hell Nintendo should have realized this themselves when a whole generation was raised on Pokemon and was willing to buy a GBA for a new Pokemon but not a Gamecube for a new Mario.
Right now the Western scene has a lot of new faces and at the same time Japanese game quality has gone downhill. In 20 years if Western devs are still relying on GTA and Halo, they're going to be the ones wondering why people are buying less Western games.