Or at least, the problem with the genre as far as Japan goes, and when we say Japan as far as RPGs go, I might as well be saying Square Enix. Western RPGs have been doing just fine of late. Bioware, Telltale, CD Projekt, Quantic Dream have all done things that were right up my alley far as the genre goes. And what's right my alley, generally, isn't all wizards, warriors, and the same sub-Tolkien jerkoffery that made me blind to RPGs made outside Japan for so long. The fantasy worlds I'd always envisioned in my head, even as a kid, NEVER included those tropes. It was always a matter of the truly spectacular happening in a world I recognized or at least identified with. For me, growing up as a city kid, medieval Europe and all its fantastical variations just never held as much sway. When it did, it was always because of the people in it, the story being told. Lord of the Rings, in book form, bores the shit out of me, because Tolkien is clearly more enamored of Middle Earth than I am reading about it. The films use the detail to fill in the background, and focus on the emotions behind them, which are powerful as hell. It's why I still listed the folks who made The Witcher in that previous bit. It's one half-man short of being set in Westeros, and the political backstab carnival that is Game of Thrones grabs me every single damn time..
JRPGs, on the flipside, eventually came to a point where they didn't have to fight for my attention with nearly the same ferocity. They always managed to stray far far away from that fantasy norm into something weirder, wilder, and (at least, surface level) deeper than that. The first JRPG to grab me was Phantasy Star IV. Yes, there was swords, armor, evil wizards and magic and stuff. There were also armored tanks, hovercrafts, space travel, cross generational antics, laser claws, cyborgs, and alternate dimensions. All that alongside a plot involving artificially made humans, the impending apocalypse, and a main character death that beats the death of Aeris for emotional impact like Al Capone at dinner time. Sign me the fuck up. After that, in the space of three years, I had devoured Chrono Trigger, Final Fantasy VI and VII, Beyond Oasis, Super Mario: Legend of the Seven Stars and Parasite Eve; Even Suikoden and the Lunar games (despite owning a Sega CD, I didn't play these until the PS1 re-releases) managed to turn me around on the straight medieval fantasy setting as a premise.
Even when they turned out crap, I still played generally every JRPG I could get my greasy hands on at least for a few hours if only because until the Playstation-era really started rolling with the idea that game plots didn't have to be watery trickle, this is where I could find storytelling, this is where I could find, well, role-playing. I want to inhabit a character and if not having control over a much more detailed fate, I at least want to be the invisible, silent conscience nudging them one direction or another, and to have my decision mean something. Either that, or at least get a story worth dealing with the constant enemy grind for.
Suffice to say, I have not gotten that out of Final Fantasy in a LONG time.
What it appears is really happening is the marriage falling apart between gameplay and story for Square Enix. Shitty gameplay in an RPG can be forgiven if the story and the characters make the trudging worth it. Shitty story in an RPG can be absolved by addictive gameplay (see: The first couple hours of Final Fantasy X-2). Now, just like a marriage, it doesn't necessarily have to be bad in order to fall apart, and in the case of modern JRPGs, it feels more like Japanese developers simply don't know how these things work anymore. For gameplay, this is a bit more forgiveable, since turn-based combat is increasingly becoming irrelevant, and even though nothing they've done has felt naturalistic since FFX, Square Enix throwing new battle systems at the wall to see what sticks is the only way they'll learn. But in all other respects, Japan is Dr. Manhattan in that one bit in Watchmen where he's looking at a woman's bra like he's analyzing every minute fiber in it, and forgetting that there were very real, naked, and spectacular tits in there a moment ago.
This is evinced by the fact that the protagonists in your average Square Enix game no longer represent characters any more so much as a vague collection of traits. I firmly believe this is why they don't allow you to rename your characters anymore, because, using FF XIII as an example, being able to rename Lightning "Stoic", Vanille "Kawaii", or Sazh "Daddy" would make the entire game pointless. The game plays exactly how you'd expect those titles to act, nothing more or less. It's not lazy, but it is minimizing characterization to the point of insult. As a reference, I tried that same experiment while playing Final Fantasy X, and aside from Wakka ("Jock") and Tidus ("Twat") every character still requires thought and analysis to really nail down, which is what makes them and their development fascinating. Even Wakka, he's like if Tebow found out, for an absolute legitimate fact, that God is a lie, and watching him spin on that for 8 hours after. The tone of his character has a fundamental shift by the game's end, and it's an interesting one.
We have essentially the same problems on every level when it comes to the designs of Square Enix's games. Worlds are no longer backdrops, with story you have to glean off the NPCs or in the background details, but whatever the art department feels like drawing that day. Very pretty, very elaborate, but I don't want to live or even pretend I live there, nor can I change it to make it better. Generally, we just know it's in danger, without being given a reason to care that's the case except in the general sense. Well, Kingdom Hearts, we care, because that's where Disney characters live, but then you also have to deal with Sora for 20 hours, and damn that, damn that to hell. The plots are complex, but without the character attachments, it's all just detail. There's no escalation of threats or tension. I got 35 hours into Final Fantasy XII and I still couldn't tell you what the fuck that game was supposed to be about, aside from Bunny Girl Fran and her race, and let's just take a moment to consider how the dumbest character design in that series was also the strongest character in the game.
And I understand that this might be a problem with Japan period. The increasing backslide from maturity in their games might be a by-product of Japan backsliding from games that require any investment beyond what they can get in with a spare 20 minutes, in which case Square Enix's epic games becoming what they are makes a lot more sense. Not giving a fuck, but with a $100+ budget is a perfectly reasonable explanation. But they can't be surprised by their irrelevance in an international games market that demands so very much more of them.