In his GDC talk, Keiji Inafune, CEO of Comcept Inc, told the Japanese game industry that it must acknowledge its loss of status in the industry and prepare to start over.
"A few years ago I said Japanese games and industry are over. Game over," he told the audience, and explained that the comments had caused him trouble with some of his Japanese contemporaries.
"These days I'm seeing some of those folks have started to run out of steam. They're in a situation where they realise that perhaps my prediction was true."
At the beginning of his talk he had prepared the Japanese attendees for harsh comments, but explained he wanted to light a fire before it was too late.
"I feel as if Japanese games are becoming a blast from the past, similar to how the Beatles were great, Steve McQueen was a brilliant actor," said the producer.
The Japanese industry must also realise the need to develop and rebuild their brands.
He argued Japan was behind the times, and warned there was limit to amount of business you can do with memories. He said shipping HD versions of games was not what users wanted, even though fans often asked him for Mega Man.
"They're showing respect to the past, the memories, and I really don't want to get carried away. I know they love Mega man, but I think they are wanting and really expecting more."
He also shared his experiences as a producer for both the sales success Resident Evil 2 and the less successful Mega Man Legends.
"I learned that establishing a brand takes a lot of work, but at the same time not to rely too much on the brand," he told the packed room. He accused those leading Japanese studios of jumping on the bandwagon, and relying too heavily on sequels.
He pointed to Apple and its direction under Steve Jobs as an example of success through innovation.
"The Japanese industry must also realise the need to develop and rebuild their brands. And we need to do so now. It'll be too late when our brands hold no equity or no power. Time is running out."
The desire to win is necessary in all parts of Japan, not just video games.
"In Japan I believe we still have some of that brand power, but we don't have the people that will pour in that huge amount of effort."
He travels to Korea often, and said the people there, in every industry from technology to entertainment, seemed to have more drive and desire to win than those in Japan.
"The desire to win is necessary in all parts of Japan, not just video games," he warned.
"I promise to introduce a new hero from Japan. That's what we're missing. We're missing a hero."
He also said he was working on a PlayStation Vita project, before joking that the audience should forget about his "slip."