Call it a twist of fate or delicious irony, but game designer Keiji Inafune, a harbinger of the Japanese gaming industry’s death, returned to Tokyo Game Show this year with one of the biggest games (as well as the biggest surprise) of the show.

“When Japanese folks noticed me at TGS,” Inafune wrote on his blog, “they looked like they wanted to say something: Maybe, ‘Death to Inafune!’ or perhaps ‘I’m a fan.’ “

Inafune, famous for his work on “Mega-Man” and the George Romero-inspired “Dead Rising” zombie games, elicits such black-and-white responses because at a press event in 2009, the then-employee of Osaka-based Capcom said the Japanese game industry was “finished.” The quote became infamous. After asking the assembled press what they thought of that year’s TGS, he said, “Personally, when I looked at all the different games on the TGS floor, I thought ‘Man, Japan is over. We’re done. Our game industry is finished.’ “

He may have been a bit premature, the Japanese game industry isn’t finished — yet. However, Inafune’s words continue to haunt it. Sure, Nintendo and Sony are still powerhouses, but many game developers seem to just putter along. It’s a long way from the glory days spanning the 1980s to the early 2000s, during which Japan dominated the global home-console market with a stream of groundbreaking, entertaining video games.

Much of Inafune’s issue with the local game industry stemmed from its reluctance to work with Western developers — something that has been changing in recent years. For Inafune, who left Capcom and started his own studio in 2010, there’s much Japanese developers can learn from their Western counterparts, and that cross-cultural pollination could ultimately lead to better games.

Inafune, never one to pull his punches, was speaking his mind in 2009 — and he wasn’t being unfairly critical. Since the current console generation started in 2005-06 and the PlayStation 2 era ended, Western games have become bigger and more powerful. The situation is similar to the movie industry, and how Hollywood steamrolled local movie industries across the globe, not with quality, but with sheer spectacle. Japan continues to churn out great video games, but many of them don’t feel as contemporary — or dare I say, as advanced — as the games coming out in the West. This is why when Inafune was at Capcom, he pushed the company to work with foreign developers, believing it would ultimately help Capcom become better.

While Inafune’s comments at the time were provocative, they were made based on traditional game development for dedicated home consoles and portable game machines. As was evident at this year’s TGS, many Japanese developers are now jumping on the smartphone bandwagon.

Many studios see an opportunity to quickly create low-budget games that may be profitable. If a studio creates the next “Angry Birds,” it’s set. The mobile space is being flooded with games by developers hoping to catch lightning in a bottle. Even modest hits can be very profitable.

Traditional video games for home consoles are very expensive to make, so smaller developers in Japan balk at the cost. If fewer studios are making console games, that means the game-development expertise required to produce these titles slides. And that means Japan could essentially concede big-budget game development to the West.

Yet, there was Inafune at this year’s TGS showing off two of the biggest games at the show. One of them, “Soul Sacrifice,” is a dark fantasy game for the Sony PS Vita, in which the protagonist can rip out his own spine and wield it as a sword. This was one of the most heavily promoted titles at the Sony booth. The other game, “Yaiba: Ninja Gaiden Z,” was a total surprise.

Right before TGS, Tokyo-based studio Team Ninja, best known for “Ninja Gaiden” and “Dead or Alive,” held a press conference at which lead designer Yosuke Hayashi said, “I remember a few years ago when a certain Japanese game designer said that Japanese games were dead. But Team Ninja is still around, we’re still strong, and we’re going to prove that to you.”

It wasn’t that Hayashi was trying to start a fight with Inafune, but he wanted to show how his team hadn’t given up.

The punchline was that during the event, Team Ninja announced it was actually collaborating with Inafune on a new game — “Yaiba: Ninja Gaiden Z,” a ninja-meets-zombie game. The game “Yaiba” had already been announced, but nobody knew it was a spinoff in the popular “Ninja Gaiden” series. That was totally unexpected.

Inafune then appeared, introducing himself as “the guy who said the Japanese game industry was dead.”

Inafune professed his admiration for the “Ninja Gaiden” games and called the project “a dream come true,” saying he was proud to be there with Hayashi.

The game is being created by Inafune’s studio, Team Ninja and Spark Unlimited, a California-based developer. According to Inafune, “We’ll prove to you that we are going to survive and make good games that will lead the Japanese game industry.”

The Japanese game industry is not dead, but it has evolved. Japanese are making hugely profitable games for smartphones that are enjoyed by millions of players. Sony and Nintendo continue to release engaging hardware and games. And Japanese developers are increasingly working with developers overseas to produce some kickass titles. Developers like Keiji Inafune.

Brian Ashcraft is a senior contributing editor at gaming website Kotaku.com.

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