As far as Japanese brand loyalty. I've seen a ton of iPhones and android phones over here. So it's starting to change for some electronics.
There isn't some brand loyalty in Japan that is special or unique to Japanese people. In America and all over the world, plenty of people have brand loyalty, simply for the reason that they like those products best.
Smart phones are newer in Japan than the US. Their phones have been vastly more powerful than ours for a long time, but the touch screen smart phone is still fresh, and Apple is raking it in with the new market. iPhones were initially "ho hum" in Japan but when they started picking up steam it picked up fast. Similar to the original reception in America, I'd say!
I maintain that a lot of things Microsoft focused on which made the X360 such a success in the western world simply do not appeal to Japanese people.
As for them ducking out of the market completely? Not a chance. They might not go headfirst into exclusives like Lost Oddysey or Star Ocean 4, but how can you ignore the third largest market in the world in a given field? Even if you only have 3-4% of it, you have to at least have one finger in the pie