Obviously his comment is ridiculous.
Some big Japanese series - Final Fantasy, maybe Metal Gear Solid, have lost their generation-defining status (Not necessarily commenting on their quality, but they don't have the same dominance they did on PS1). Some lesser Japanese series - Tekken, Soul Calibur, etc. have also severely declined in their grasp on the gaming mindshare.
Simultaneously, several Western series have come to prominence - Assassin's Creed, Call of Duty, Uncharted, Halo etc.
However, the idea that most Japanese games are terrible is absurd. Unless you assert that the same is true of Western games too as a result of the sheer volume of games coming out.
In order to assert that Western games suck I feel that it requires a certain level of ignorance, which large swathes of the industry has engaged in. This is ignorance of portable games - where even the likes of Square Enix has done brilliant, creative work (The World Ends With You, Dragon Quest IX), and ignorance of Nintendo systems. We all know about the industry's attitude towards the Wii, and yet it features a number of mechanically superb games, which tend to be ignored (either altogether or as a consideration of whether they are Japanese) in such discussions.
Also, many in the Western games industry are keen to blow the trumpet of Indie games development, which is great. For them this is a great development (I don't disagree). However, they tend to embrace this change and yet ignore the shift of Japanese creativity towards portables. This leads to a distorted perception of the industry.
Don't get me wrong, it is fine not to like Nintendo systems or not to like portables. Preference is no problem at all. But the key is to be aware of your own narrowed taste. If Phil Fish had said that he tends to prefer Western games to Japanese games then there would be very little problem here. It is absurd to imply that Japanese games share development or mechanical or artistic styles - a cursory examination reveals this to be foolish. Just look at Vanquish next to a Tales game. Or Mario next to Dragon Quest. Or Soul Calibur next to Hyperdimension Neptunia (or whatever it is called). Or Resident Evil next to Recettear.