I think it's simply that the market over there is already saturated with tons of games people would rather play instead. They have Ninty, they have Dragon Quest, they have Final Fantasy and they have Dark Souls and friends. By comparison, Sonic seems like outdated babyshit that doesn't have anything those other games offer. When stacked with all those giants, I can't really blame them as casual fans for having such an impression. It certainly doesn't help that there still isn't that SUPER SRS large-scale story-rich RPG that those gamers can sink their teeth into, and the only other RPG is on old outdated hardware and has basically been quietly de-existed. Sonic seems like a distraction without a whole lot of substance this way.

I made a whole thread about this in 2020 or something but there's also the fact that Sega just didn't seem to care very much about promoting Sonic in Japan either:

• Most franchises got stuff like "drama CDs" and "image songs" and other quirky extra audio content but in Sonic's case if it's not a soundtrack CD nobody seems to want to fund it.
• Most franchises got heaps of different manga adaptations over the years but in Sonic's case it's a smattering of 4komas and one-shots that were never collected, a 90s manga that was never collected, the Dash & Spin manga that skews young and is mostly all gags, and the very short adaptations of the late 2000s games that were also never collected and all ended on a "to be continued in Buy The Fucking Game" note, so there's not much to take away from them as their own pieces of entertainment. The Japanese translation of the IDW comics is also way, way behind, and doesn't seem to have caught on much steam despite the JP account's best efforts to promote it. Time will tell if the newest Shadow manga is going to surpass the bare minimum (a collected graphic novel I can buy is something I'm hoping for, at least).
• In general Sonic just doesn't have a whole lot of "side" stuff? No representation in Project X Zone, no super-deluxe Sonic X Blu-ray with special features and voice actor interviews, no appearances of said voice actors at cons (I think Kanemaru himself made some strongly worded tweets about this that were quickly deleted), no new anime that airs every week and promotes discussion online, no Japanese-language activity books or novels targeted at tweens. And meanwhile the West has most of these things and then some. Sonic the Hedgehog really seems like a Western with Side Japan franchise this way, huh? What other series is like that? I can only think of Ratchet & Clank in that "a JPN dub so good, you'd think these games were originally Japanese" way.

All that said, it seems they are finally coming around in recent years and realizing that, oh yeah, we do have a market in this country. The YouTube shorts, the monthly stories, the in-character Q&A with Sonic, the aforementioned Shadow manga, the live broadcasts and the various Twitter community initiatives seem to be going a long way to get some new fans on board, if only to see what the fuss is about. The JPN Twitter account itself has more followers now than it ever did. And while the sales of SSG seem middling compared to the rest of the world, it probably isn't the flop it appears to be either. There are games that would absolutely love to get even half of that 10K sales count. And the next game in the series, whatever it is, will be the next big mainline game in the franchise so I'm expecting this downward trend to turn itself around in a year or two.