....This is an issue Japan itself has to deal with honestly :l.
Over the years, both the West and Japan have had issues with female representation in games, but recent years due to the gaming climate changing thanks to people calling that crap out, more and more modern western games have been doing a much better job with their female characters.
There designs are far less offensive then in the past, they have been in leading roles more (Tomb Raider, Remember Me, Transistor, Mirrors Edge PS4/X1, Horizon Zero Dawn, ect) alongside having more major roles in games (Gears 4, AC Unity, Dragon Age Inquisition, ect). So while the issue is still present in western games, it has been getting better honestly
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Japan....they haven't changed at all :l. We still have JP games that don't use fan-service like Kingdom Hearts, many JP games like using fan-service and have 'exaggerated' female designs. Team Ninja games were the exception rather than the rule, but even something like DOA is tame in comparison to more recent JP series (the SK series, various games banned on Gaf, Sword Art Online Hollow Fragment, ect).
The thing is that Japan isn't that bothered with sexuality; it seems like they are more open to that concept and like to celebrate it a lot more then it is in the west (explaining games like DOA and SK).
The problem is that the west isn't nearly as open to sexuality next to Japan, leading to culture-clash when overly sexual JP games get localized (noticeably so in recent years); western gamers react in a toxic way to the product and it ends up leading to people trashing the game due to its image or it outright banned from discussion.
Personally, I don't mind games with heavy fan-service if the game is high quality gameplay/story/design wise but it can bother me though (wasn't a huge fan of the fan-service in the SAO games at times....). But I'm not everybody; a large number of people are bothered by this and Japan-developed games should consider ways to counter-act those elements for people that are offended by them.
Optional 'censored' mode that gamers can pick from the start, male characters having the same fan-service as female characters (in the case of something like Dead or Alive); taking measures to make the games more inviting to people.
And some of them are already doing this, as the SK:EF has an option to disable the cloth tearing for people that are bothered by it (same with Neptuina: Action Unleashed), SK2 is having male characters join the roster, and even games far back like Dragons Crown have options for other types of female characters (the Elf for example; modestly designed and less offensive then the other female characters). Japan is learning, but its taking slower for them in comparison to the west due to the games appealing JP gamers, thus giving them less push to make the games having less fan-service.
Sorry this post is long XD! Edit: To back up a few of my points and to explain my points in greater detail, check out this YouTube video from the great Gaijin Gomba
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https://www.youtube.com/watch?v=gI55CyoPsVU