Games

Devs have been porting (or originating) everything to PC since the PS4/XBONE era. So a decade or so? And first party development is lower across the board (excluding all the stuff Microsoft was doing before they stared culling studios left and right) because first parties are expected to release CoD level games rather than cool and fun platformers (Astrobot aside). NOBODY is doing Last Of Us level games en masse.

But basically you are describing the paradigm that MS have arguably been working toward since the start of the current generation. The idea that it doesn't actually matter what hardware you buy so long as you buy the services/games of one of the platform holders. If you REALLY love Halo? Get an XBOX. If you REALLY love The Last Of Us? Get a Playstation. With the rest being third parties. It... just so happened that Microsoft bought most of the big name third parties and are figuring out how to balance "CoD prints money" with "We want to sell xboxes".

But that still leaves what box you buy. And, in that regard, consoles are still going to appeal to "gamers" more than a desktop ever will. Especially as more and more kids become adults who don't even like laptops because EVERYTHING they do is on a tablet.

As for Japan: The key there is not "Steam". it is "Deck". Japan has ALWAYS loved handhelds. In large part because the cities don't have a lot of space for a giant TV and an entertainment center that can fit however many cubic meters the PS5 Pro is at this point. And a bigass desktop PC is also going to be a major space issue when so many people are used to a laptop while they sit in a chair or whatever. And while I do think the Steam Deck is going to do wonders to increase PC market share in Japan, I still don't see it significantly overtaking consoles for "gamer gaming" as it were and to instead be more slotted in the mobile space and indie games like Stardew Valley that run perfectly fine on ultrabooks.