Xerox did not 'allow' their monopoly on copiers to expire. They regularly filed large numbers of patents and engaged in monopolistic commercial practices in an attempt to lock up one or more elements of the supply chain. The FTC then forced them into a consent decree in the 1970s that required them to license the patent portfolio at a reasonable royalty fee. This allowed the Japanese market entrants to compete and therefore innovate for the benefit of the consumer.

Edit: arguably, because Xerox did not have to compete with the Japanese until legal actions were taken, they were NOT actually on their toes and lost ground rapidly once the market was opened. Had they been forced to compete by the late 1960s instead of mid 1970s, they may have been in a better position to sustain themselves against foreign competitors.