I think Microsoft bailing out would be very short sighted of them. While it true that right now Western gamers don't care as much for non-Nintendo Japanese games, there's no reason to believe that is a permanent situation. There could very well come a time again when Japanese games are what drive console sales. In that case, it's in Microsoft interest to have a continued presence in Japan, so at the very least they can get multi-platform releases.
Microsoft's nightmare situation is next gen they abandon Japan, don't get FF XX, and watch that game become the most popular game of the generation, not available on their system.
And of course Microsoft's actual goal is to dominate the living room - a Japanese living room is worth as much an American or French living room. There's no way they'd just abandon a country with the population and wealth of Japan.