Xbox is seeing growth in Japan, with cross-platform player engagement across its gaming ecosystem rising significantly throughout 2025. With Japan being one of the world's largest video game markets, this newly reported momentum offers an encouraging sign for Microsoft, standing in contrast to recent challenges that Xbox has faced.
While they started out similarly, Xbox Series X/S sales began lagging behind the Xbox One in recent years. For the FY25 Q4 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 has stopped providing regular updates on subscriber numbers. Amid these challenges and an industry-wide trend of longer, costlier development cycles, Microsoft has recently pivoted to third-party publishing, bringing some of its biggest franchises to rival platforms in an effort to boost gaming revenue.
Xbox Is Growing in Japan, Phil Spencer Says
Contrasting these challenges, Xbox has seen some uplifting performance in Japan. That's according to Microsoft Gaming CEO Phil Spencer, who shared as much in a recent interview with Famitsu. Total playtime has grown about 20% "in the past year," the executive said, clarifying that this number includes Xbox consoles, PC games played via 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-Oriented Games May Further Improve Xbox Numbers in the Country
Reflecting on the current performance, Spencer opined that Xbox has even more room to grow in the Far Eastern country. "There is an expectation that if we provide content for Japanese players, [engagement] will grow even further," he said. That strategy appears to already be in motion, underscored by the recent announcement of the Japan-set Forza Horizon 6 at the 2025 Tokyo Game Show.
Why Japan Is Attractive to 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 figures include mobile games—which make up a small portion of Microsoft’s gaming business—Japan also ranks among the top markets for console and PC gaming, with 29.7 million console players and 14.4 million PC gamers, according to the CESA Game Industry Report 2024.
Another Promising Sign for Xbox Business: Revenue Growth
Time will tell whether Microsoft's push to deliver more Japan-themed gaming content in the form of DLC and full-fledged games ends up being a shorter trend or a sustainable long-term strategy. Another open question is whether increased playtime in Japan will translate into sustained revenue growth. On that front, the Xbox division has just reported annual revenue growth of 16% (or 15% with foreign currency fluctuations accounted for), meeting its key performance target for the first time since 2020, according to Microsoft’s latest proxy statement filed with the SEC.
Sources: Newzoo, Automaton West, Microsoft / SEC