From what I can tell by
recent activity on his Twitter (machine translated, so your mileage may vary), he wasn't actually needed in the end for new compositions.
Reportedly only 20% of the music made for the original Shenmue games was actually used, so they'll be drawing from that vast audio library for Shenmue III. Shenmue Online was also supposed to do the same, and some of the OST made it onto the web in like... 2004, 2005? There are some properly
great tracks in there, and even Iuchi said there are some "
buried masterpieces" in the sound library.
From what people who've played the demo at trade shows have said, it seems Shenmue III's OST is a mix of old songs, remixed songs, and unheard songs. There still may be original compositions in there for small stuff (new arcade machines maybe), but they might be handled by Sound Director Takayuki Nakamura (AM2 sound staff alumni, Lumines, Rodea the Sky Soldier, etc) if so.