If you look just at the handsets available in 2000 or so it would have been very easy for Japanese telcos to look at what the world had to offer and conclude it was not much. Compare turn of the century Japanese devices* next to four-color phones like the Siemens S25 and Motorola's monochrome handsets.

If you want to blame anyone for not pushing adoption of GSM GPRS and beyond it shouldn't be Japan. There's one country that could have made it the obvious choice for everyone, but thanks to "competition" it never happened...

*i.e. J-Phone Sharp J-SH04 http://en.wikipedia.org/wiki/J-SH04