Sales of videogame products dropped by 15.3 per cent in Japan during 2008, to JPY 582.6 billion.
According to data from Enterbrain, the decline was due to a lack of new hardware in 2008, in contrast to the two previous year's which saw the launch of the Wii and the PlayStation 3 in the region.
Nintendo's DS was the best selling hardware during 2008, shifting 4.03 million units, compared to Sony's 3.54 million PSP sales.
The Wii sold 2.91 million units during the period, while the PlayStation 3 moved 991,000 units and the Xbox 360 318,000 consoles.
Software sales in the region fell 7.9 per cent during 2008, despite stellar performance from titles such as Wii Fit and Mario Kart Wii.
The decline is in contrast to the market in the UK, which grew by 23 per cent during 2008.