There's a lot of problems: software engineers that come out of university are generally much less skilled than from comparable American or European universities, the culture and government policy discourages start-ups, most programmers speak very little English, workforce mobility is extremely low... many companies hire only fresh graduates through a tedious process that begins one year before graduation, and don't even hire experienced people.

Japanese companies usually suck at software. The emphasis has always been on the hardware -- one of the most obvious examples is the cellphones, which have always had extremely good hardware but very poor software and almost no applications to speak of. My 3-year-old phone has an 8MP camera, infrared transmission, TV, and I can use it as a train ticket, but the browser is so bad I can't even use Reddit's mobile version and it can't render HN comment pages with more than 100 or so comments.

Youtube and Facebook are not Japanese companies, after all. The local equivalents, Mixi and Niconico, are Japanese-only and have zero interest in internalization. Some companies like Rakuten are trying to reach overseas, but it's not an easy fight...