I doubt this has anything to do with why XBox didn't do so well in Japan but "X" in Japanese means "no, bad, don't want it, wrong". "X" in Japanese is pronounced "batsu". When you mark something you either mark it with a circle "O" pronounced "maru" to mean "yes, I'll take that, correct" or with an "X" for "no, bad, wrong, don't want it". If you watch any Japanese game show you'll see them talk about "maru" and "batsu". When they show someone get the answer correct a "O" maru will appear. When they are wrong a "X" batsu will appear. If you are you with your friends and they challenge you with a question, if you guess correctly they will say "maru!" and if you guess wrong they might say "batsu!". If you lose a game they say "batsu−game". Batsu is also a kanji character, 罰, which means punishment or penalty.
ps: XBox fans, don't get yourselves worked up. This isn't a dis on XBox, I have 2 of them. But, it is interesting that X in the U.S.A. is like eXtra, eXcellent, eXtreme, ... but it has no such connotations like that here in Japan and in fact arguably means the opposite.