From what I've read, Japanese phones are feature laden, but difficult to use.
There a few things missing in the iPhone, such as:
-- the Felica RFID chip that is used purchase things & pay train fares
-- Live TV/Radio
-- Messaging shorthand.
To add to that,
--Not just messaging shorthand, but also inter-handset emoticons/emoji/graphics
--Uhh, color choices. That's really just not that hard.
--Something as simple as a keitai strap
--Camera -- The iPhone has a lousy one, but you wouldn't believe how many weird people here rely on cameras on their phones and don't use digital cameras.
--Transferring old Softbank email addresses. I overheard this one outside an Apple store. Apparently, it is either impossible or a difficult DIY to maintain an old cell email address. (In Japan, people typically have a separate address for cell email, different from computer email, so losing the cell email can be a problem.)
In other words, some things that are deal-breakers are missing hardware/features, but some are just a matter of providing what people are used to getting (color, cell email, better camera). To put it simply, the result of all this is that the iPhone doesn't appeal to youth, nor very well to the many people that rely on cell phones for communication more so than a computer. (Some people don't have the latter.)