The Xbox failed pretty dismally overall in Japan, and even the Xbox 360 saw slow movement upon it's much-hyped released. Partially due to cultural differences and partially due to initial poor game selection, Microsoft has been unable to compete with Nintendo and Sony in Japan. While it may have something to do with Nintendo and Sony having very strong Japanese ties, Microsoft is still looking to make headway. As such, they are planning to offer a barebones version of the 360, the same one that has already been available in the U.S. for some time:
The XBOX 360 Core System has been available in the United States and Europe since its Q4 '05 launch. In the United States, the XBOX 360 Core System forgoes the 20GB hard drive, chrome trim, wireless controller, Ethernet cable and XBOX Live Headset. The Core system also features a Composite AV cable instead of the Component HD-AV cable.
Though I personally don't see why someone in Japan would be interested in a cheaper, but dumbed-down version of a console that is already selling poorly, MS thinks otherwise. Will this help them? The price, at least, can't be beat. Factoring in the exchange rate, the cost of the console is only about $86 USD, making it by far the cheapest next-gen console available. Of course, what good is a house if it doesn't come with a roof?