Rather than shrinking it was a collateral effect of having just 2 platforms doing good (PS2 & GBA from 2001 to 2004). Same in 1999 with PSX and GB slowing just like PS2 & GBA did in the end.
But now in 2005 and 2006, there were 3 active platforms, DS, PSP and PS2...and two more later in 2006 (Wii and PS3). Of course DS has expanded the market in 2006, if not it would be around the other numbers.
Now 2007 looks good for the japanese industry, DS continues its way to be the top platform ever, PSP far better second-place console than usual, and in handheld market were there was no second-place last time. PS2 slowing and probably dying this year although it'll help to cover lower than expected PS3 sales, and then 'factor Wii' that can become a new hit like DS or at least a PS2-type console. 15m for the year looks very reasonable to me