The Japanese phone mfrs have had complete control of the entire platform (network, hardware and software) for too long. More than likely the dictionary mfrs and the phone mfrs were just staying out of each others' verticals. Now software (Apple,Android) is finally disrupting that and changing the market but I wouldn't agree that the Japanese thinking is around single function products. There's just a better solution now that didn't exist in the market before. Even then, I feel like culturally it's ok to use a dictionary in class but not a cell phone...
This article (http://www.informationarchitects.jp/en/kenya-hara-on-japanes...) does a good job describing how "less is more" is interpreted differently in Japanese design.
Would you rather use a TI-calc emulator on android or the actual device?
[1]no, really
It is a matlab/octave emulator. It works great, even on my 2.1 android phone.
What Japanese are attached to is the 12-key flip phone form factor. So much so that Sharp released a 12-key flip phone running Android a year or two ago. My guess is that the dictionaries fill a high-end niche that cellphones historically could not: when you need a more extensive dictionary, have to look up a lot of words or translate entire sentences, and need to type quickly. As smartphones (iPhone, Android) become dominant, I think those dictionaries will disappear.