Data from Enterbrain, the publisher and analyst firm behind Japanese games bible and MCV media partner Famitsu, has shown that Japan’s games market in August was down 17 per cent compared to the same month last year.

The decline was lead by a 29 per cent drop in hardware sales – software sales dropped a more moderate 6.3 per cent.

For the first time since March Sony’s PSP failed to win the hardware battle, despite sales of 292,000 – Famitsu speculates that the upcoming launch of the new PSP 3000 in October is the cause. The drop paved the way for Nintendo’s DS Lite to steam back to the top of the pile, with sales of 333,000.

It was a good month for Microsoft’s Xbox 360, however. It’s 45,000 hardware sales were three times that sold in August 2007, and Namco Bandai’s 360 exclusive RPG Tales of Vesperia performed very well, selling 133,000 copies. And with Microsoft’s hardware price cuts coming into effect, Famitsu sees a strong close to the year for the console on the way.

Wii sold 181,000 consoles in August, with PS3 shifting 53,000 and PS2 45,000.

The top performing game in the period was Nintendo’s DS outing Rhythm Tengoku Gold, with sales of 625,000. This was followed by Sega’s PSP title Phantasy Star Portable (572,000), which has already sold well enough to be crowned the machine’s fifth best selling game ever.