Good points all around. While it would be possible for the PS4 to inch by to the PS3's LTD it isn't super likely. We might see a Vita situation where the hardware doesn't sell all that well but it still manages to push software well enough.
Honestly the only company that I think could revitalize the console market in Japan is oddly enough Nintendo, but only if they take the approach they took with the DS and Wii. Cheap and easily accessible hardware with software that appeals to a wide audience. Sony is focused on the "core" right now, and for good reason. The core market in the west is massive now and their focus on that is doing very well for them. The PS4 is just too expensive and not as accessible to many Japanese gamers as mobile or handhelds are.
To me the core issue here is what Nintendo did then relative to where the market is now.
When the DS and Wii came out, Nintendo basically looked at games and correctly determined "Video games are too inaccessible for a large audience of people. If we simplify things such as input control, make some of the games more simplistic, and lower the price, we can attract a large audience." And they ended up doing just that.
However, in 2014, everyone owns a smartphone, so the hardware cost is irrelevant. You can't make an easier interface than no button touch. You can't make games simpler than auto runners, match 3 titles, and tap to win stamina games. And finally, you can't sell games for cheaper than free.
Mobile essentially took what Nintendo offered and brought it to its logical conclusion.
At this point, you're basic option is to offer something slightly more complicated. This is why things like Animal Crossing or Mario or Pokemon do well on 3DS, because they're accessible, but have a but more depth than what you tend to find on phones. Games like Brain Age on the other hand tank as there is zero reason to not just grab a phone game like that if you want one.
The issue Nintendo faces here is that this is a more limited audience in number of people, hence why the 3DS has sold quite a bit less than the DS.
Where console gaming gets into even more trouble (and the Vita as well) is that basically the main appeal of those systems is for audiences that want something even more computationally or control-interface complex than the 3DS can handle. The issue here is that in Japan the genres and types of games that fit that bill aren't popular, so there's almost no demand. Mobile and 3DS don't handle FPS and open world games well? Who cares?
Now if someone could invent a new genre or type of game that was ragingly popular in Japan, and only functioned in consoles, they might have something, but without that I see very little to drive recovery.