Xbox is seeing growth in Japan, with cross-platform player engagement across its gaming ecosystem growing significantly through 2025. With Japan being one of the world's largest video game markets, this newly announced momentum offers an encouraging sign for Microsoft that contrasts with the recent challenges Xbox has faced.
While they started out similarly, sales of the Xbox Series X/S have begun to lag behind the Xbox One in recent years. For the Q4 FY25 period ending June 2025, Microsoft reported a 22% year-over-year decline in hardware sales. Meanwhile, Xbox Game Pass growth has been slowing for years, so much so that Microsoft stopped providing regular updates on subscriber numbers. Amid these challenges and an industry-wide trend toward longer and more expensive development cycles, Microsoft has recently focused on third-party publishing, bringing some of its biggest franchises to competing platforms in an effort to boost game revenue.
Xbox is growing in Japan, says Phil Spencer
In contrast to these challenges, Xbox has seen some uplifting performance in Japan. This is according to Microsoft Gaming CEO Phil Spencer, who shared this in a recent interview with Famitsu. Total gaming time is up 20% “over the last year,” the executive said, clarifying that figure includes Xbox consoles, PC games played on Microsoft platforms and Xbox Cloud Gaming users. Asked for a more detailed breakdown, Spencer said the three platforms grew mostly evenly. He described the growth distribution as being in line with Microsoft's strategy of wanting people to play on Xbox regardless of their device of choice.
Japan-focused games may further boost Xbox numbers in the country
Considering current performance, Spencer said Xbox has even more room to grow in the Far Eastern country. “It is expected that if we provide content for Japanese players, [engagement] will grow even further,” he said. That strategy appears to be already in motion, underscored by the recent announcement of Japan's Forza Horizon 6 at Tokyo Game Show 2025.
Why Japan is attractive for Xbox (and any other gaming platform).
While Xbox has historically maintained a modest presence in Japan, the country represents a major opportunity for any platform holder. A recent Newzoo study ranked Japan as the world's third largest gaming market by revenue ($16.8 billion), behind only the United States ($49.6 billion) and China ($49.8 billion). Although these numbers include mobile games – which make up a small part of Microsoft's gaming business – Japan also ranks among the leading markets for console and PC games, with 29.7 million console players and 14.4 million PC players, according to the CESA Game Industry Report 2024.
Another promising sign for Xbox Business: Revenue growth
Time will tell if Microsoft's push to deliver more Japanese-themed game content in the form of DLC and full games ends up being a short-term trend or a sustainable long-term strategy. Another open question is whether longer playing time in Japan will translate into sustained revenue growth. On that front, the Xbox division just reported year-over-year revenue growth of 16% (or 15% adjusted for foreign currency fluctuations), hitting its key performance target for the first time since 2020, according to Microsoft's latest filing with the SEC.
Sources: Newzoo, Automaton West, Microsoft/SEC
