I think it is just a combination of a) betting against Switch revitalizing Nintendo/Japan/Portable gaming to any significant degree and b), as I believe they said wrt MH, wanting to shift away from the Japanese market anyway, thinking that the future lay elsewhere.
The problem is that as Capcom jumped ship, Nintendo did put out a portable device with positive momentum in not only Japan but also the rest of the world. And they are/were conspicuously absent after having been conspicuously present. Which sucks for the Japanese domestic market. Hopefully they turn that around.
I think those are things that have floated across plenty of minds in the lead up to Switch: that portables were on decline especially outside Japan, that a post-mobile boom handheld might be another huge drop-off from 3DS in Japan and elsewhere, that Nintendo was between a rock and a hard place and might not find much success. It just seems that Capcom also thought these things imo and bet that way.
Yes, these are my thoughts too.
PS4 launched in Japan 22-Feb-2014. Over four years ago which has given SCE and Japanese third parties time to establish development engines and business plans.
In that time, CEO's / Managing Directors / Presidents of Japanese developers and publishers have seen the implosion of Wii U worldwide, the erosion of 3DS and dedicated gaming handhelds worldwide in general [and the fear of continuing decline with successive handheld generations], implosion of Vita worldwide despite a Japanese resurgence.
Faced with this prospect of a barren hardware landscape and the departure of some high profile software companies from the industry entirely [eg Konami], what would you do? Also, factor in the commercial responsibility of multi-million pound budgets, accountability to shareholders and the responsibility of the continued employment of dozens or hundreds or thousands [and many thousands more in the development pipeline] resting on your decision. It's just sound commercial sense to go with Sony. And with 70 Million + PS4's out there, the decision to throw their lot in with Sony has been vindicated.