charlequin
Banned
Some of these games were so bad
I feel like this is kind of a key point here. During this period, Atlus were also localizing plenty of garbage (poor quality and/or not actually desired by basically anyone) non-strategy RPGs -- Master of the Monster Lair, Rondo of Swords, Baroque, Izuna (1 and 2!), Jewel Summoner, etc., and those have fallen off in precisely the same way. I think this is much more indicative of a reduction in localizations and a significantly higher bar in general than anything to do with SRPGs.
I think Knights in the Nightmare is too different from SRPGs to state that it's a vote of confidence for the SRPG genre.
I honestly don't see any way to square this with the idea that you have a good enough picture to opine meaningfully on Atlus' release schedule. There is no conceivable scenario in which Atlus' leadership made a decision to move away from SRPGs because of their market performance where a game like KitN would not fall into the same category.