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Hideki Kamiya thinks Japan should be proud of ‘JRPG’ and wants to use ‘J-Action’
(www.videogameschronicle.com)
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I think it doesn't truly mean "Japanese RPG's", even today. There are lots of Japanese games that don't get called JRPG's even though they are RPG's or have those elements (there is ambiguitiy in what an RPG is too, admittedly), like Resident Evil games and Dark Souls games and Zelda games and Pokemon. Dark Souls especially, since they have the character building and stats as well as the roleplaying.
People don't call Elden Ring a JRPG because JRPG is supposed to mean one thing but really it carries a lot connotations about mechanics, graphics, and the derogatory connotations about quality.
And Pokemon! Pokemon is very clearly a JRPG in the mechnical and graphics sense, but it doesn't typically get called a JRPG. I think this is because of the negative connotations of JRPG, personally.
And on the other hand we have things like Chained Echoes, which is in all mechanical and graphical ways is a textbook JRPG, except it's not made in Japan at all, but rather inspired by Japanese games.
I agree this is complicated, but I found Jimquisition's video on the topic really persuasive. I recommend that one even for people normally don't jive with Jimquisition's style.
Within any group, there will always be some who don't find a term offensive even while others do, but I think probably the best outcome in this case is for the general populace to move away from the term, while leaving space for Japanese video game devs to reclaim it and use it themselves if they wish to.
Maybe it will truly lose the negative connotations with time, but I don't think we're there yet, when people are only just starting to sometimes acknowledge it ever had those connotations in the first place.
Granted, most genre words are vague and confusing as hell - JRPG isn't special in that sense - but most don't have the racist history/implications or negative connotations. And when I try to think of another genre label that is used as an insult, the first that comes to mind is Visual Novel, which is another one that is heavily associated with Japan.
I've always thought of Pokémon as a JRPG.