Xbox sees growth in Japan, with cross-platform player engagement across the gaming ecosystem rising significantly by 2025. With Japan as one of the world's largest video game markets, this recently reported momentum offers an encouraging sign for Microsoft, which contrasts with the recent challenges Xbox has faced.
While they started out similarly, sales of the Xbox Series X/S began to lag behind the Xbox One in recent years. For the FY25 Q4 period ending June 2025, Microsoft reported a 22% year-over-year decline in hardware sales. Meanwhile, Xbox Game Pass growth has slowed for years, so much so that Microsoft has stopped providing regular updates on subscriber numbers. Amid these challenges and an industry-wide trend of longer and more expensive development cycles, Microsoft has recently turned to third-party publishing, bringing some of its biggest franchises to competing platforms in an effort to boost gaming revenue.
Xbox is growing in Japan, says Phil Spencer
In contrast to these challenges, Xbox has experienced an uplifting performance in Japan. So says Microsoft Gaming CEO Phil Spencer, who shared as much in a recent interview with Famitsu. Total game time has increased by about 20% “over the past year,” the executive said, clarifying that this number includes Xbox consoles, PC games played through Microsoft platforms and Xbox Cloud Gaming users. Asked for a more detailed breakdown, Spencer said the three platforms grew mostly evenly. He described the growth allocation as being in line with Microsoft's strategy of wanting people to play on Xbox regardless of their device of choice.
Japan-oriented games could further improve Xbox numbers in the country
After reflecting on the current performance, Spencer felt that Xbox has even more room to grow in the Far Eastern country. “There is an expectation that if we provide content for Japanese players, [engagement] will grow further,” he said. That strategy appears to be already underway, as underscored by the recent announcement of the Japan set Forza Horizon 6 at Tokyo Game Show 2025.
Why Japan is attractive to Xbox (and all other gaming platforms)
While Xbox has historically had a modest presence in Japan, the country represents a huge opportunity for all platform holders. A recent Newzoo study ranked Japan as the world's third largest gaming market by revenue ($16.8 billion), trailing only the United States ($49.6 billion) and China ($49.8 billion). While these numbers include mobile games — which make up a small portion of Microsoft's gaming business — Japan also ranks among the top markets for console and PC games, with 29.7 million console players and 14.4 million PC players, according to the CESA Game Industry Report 2024.
Another promising sign for Xbox Business: Revenue growth
Time will tell if Microsoft's push to deliver more Japan-themed game content in the form of DLC and full-fledged games will be a short-term trend or a sustainable long-term strategy. Another open question is whether increased playing time in Japan will lead to sustained revenue growth. On that front, the Xbox division just reported annual revenue growth of 16% (or 15% with currency fluctuations accounted for), meeting its key performance target for the first time since 2020, according to Microsoft's latest proxy statement filed with the SEC.
Sources: Newzoo, Automaton West, Microsoft / SEC
