Digital distribution is either the savior of the video game industry or a vile scourge, depending on who you ask. I hate it for all the reasons people tend to bring up, so I'm not going to regurgitate them here. What does interest me is a comment I read/heard somewhere, and I wish I could remember where so it doesn't seem like I'm pulling things outta nowhere. Apparently the Japanese are wary of digital downloads because they don't trust it, and would rather have physical goods. It's interesting to hear this applied, because if you try to poll America or anything else, I don't think you'd get a straight, consistent answer. It might be a huge over generalization - apparently the Japanese iTunes is also making a killing over there, although the markets are completely different - but let's for a moment say it's true. So the question is, why would that be the case?
I think the PC game market has a lot to do with it. Ever since the appearance of hard disks, gamers no longer needed their floppies unless they needed to reinstall, and usually just kept packaging around for copy protection purposes. Eventually CDs required use of the media to play the game, but within another decade or so, hard drives became so large that nearly all games just copied themselves entirely to the computer anyway, with the CD/DVD only been used for irritating copy protection. And with that has come an increasingly annoying number of disc-based DRM schemes like Securom (aggrvating but not terrible) and Starforce (The Devil in the form of a rootkit.)
It's more than just that - the packaging for PC games has become all but non-existant. In the days long past, Infocom games would come with tons of near little extras. Sierra games also usually had fun little supplemental material - Space Quest in particular had a made-up tabloid. But then as time marches on and the emerging management class wanted to cut costs, these went away. Now many PC games are in small, generic cardboard boxes, which can't even afford the decency to put the disc in a jewel case, opting instead for a sleeve. You're lucky if you get an instruction manual that's not a PDF. There are still games that cone in thick DVD-style cases, but even those are sad. Last year, Xbox 360 gamers complained about the release of Lost Oddysey, where three of its four DVDs were stacked on a single spindle, and the fourth in a paper sleeve wedged into the instruction manual. Little did they realize this was commonplace amongst PC games. Futhormore, there's no marketplace for used PC games (outside of Amazon and the like online, which are a bit shifty due to DRM), so people don't assign "value" to them like they would console games, to be traded at Gamestop or elsewhere. The long and short of this has taught PC gamers that physical media is not only a hassle, but also worthless.
Now, we're seeing the PC and console markets merging together even closer, especially with the dominance of Western games in the marketplace, so it's natural that some of that PC mentality would blend in. Japan, however, doesn't even remotely have the same PC game market. As mentioned several times elsewhere, it consists entirely of (A) Western games (B) a small selection of Falcom stuff, and (C) porn. The markets haven't merged in the same way, because that market is tiny to begin with.
I think another big difference has to do with the fanbase, and how Japanese companies (I can't think of a nicer word) exploit them. For a lot of them, their products diversify far beyond games, moving into art books, soundtracks, manga, figures, and any number of assorted trinkets. Part of being a fan is part of being a community, and with that mentality, comes a lot of collecting, which by virtue involves material goods. That, of course, includes the game itself, or any other games in the series. And with this spawned the huge collectors item releases. Take that aspect away, and what do you get? By comparison, digital distibution is remarkably unfulfilling.
(As a tangent, some of that mentality is bleeding over to the Western audience, although not in the same way. "Limited editions" are becoming more prevalent than before, but Japanese special editions are usually a lot more than a tin case and bonus disc, and are usually a lot more expensive too. The only Western game that really tried this on the same scale is the Halo 3 Legendary Edition, which performed rather underwhelmingly. You're seeing this sort of things being marketed more and more over in the US - the soundtracks from Sumthing Else, or the Capcom artbooks from Udon - but it's not nearly to the same scale as Japan, and I have no idea if they're even profitable. )
So I don't think it's a case of cultural sensibilities getting in the way. Rather, it's just the nature of the marketplaces in the respective territories that have conditioned consumers in a certain manner. I'm sure the corporations realize this, and know that change can't come overnight, and will try forcing it on us anywhere, hoping that time will sway people. I sure hope it doesn't.
Sketch brought up a point I completely neglected - compared to the rest of the modern world, Japan kinda hates credit cards and are, comparatively speaking, more of a cash-based society. Why, I don't know - it's a whole other topic - but that alone would obviously make people wary about buying little ones and zeros over the internet. It's definitely one of the main reasons for the existence of prepaid cards. (The whole ordeal also makes shopping there as a tourist extremely aggravating, and it doesn't help that most of their ATMs don't take foreign cards...)