In addition, the electronics giant said in a statement on Tuesday that the PS4 would now retail at 34,980 yen ($290) in Japan, down from 39,980 yen ($331).
The PS4 price slash comes as traditional console gaming faces stiff competition from mobile games in Japan. Console software revenues in Japan are seen at $4.4 billion this year, below mobile gaming revenues at $6.2 billion, according to market research firm Newzoo.
Sony's PS4 is the leading console on the market and had sold 20.2 million units as of March 1, following its release in November 2013. Analysts at Daiwa Securities predict that Japan sales have reached roughly 1.5 million units, below 10 percent of the total.
The PlayStation is a key part of Sony CEO Kazuo Hirai's turnaround strategy as it is one of the company's most profitable businesses, amid a decline in the smartphone unit.
Sony is not the only games company having a tough time in Japan. Nintendo has struggled over the last couple of years, but is now making a strong push into mobile gaming. But Sony said the PS4 price cut was not due to the challenging environment in Japan but down to the fact that it had enhanced its lineup of games in time for the the holiday season and wants to get people using the PlayStation 3 model to upgrade.
"In hopes to deliver the PS4 experience to those old PlayStation fans who don't own PS4 as well as to those new to PlayStation, and in conjunction with this positive momentum, we have decided to set a new price point in Japan, further accelerating the install base of the PS4 in the region," Sony said in a statement to CNBC. The Japanese company did not say whether it would cut the price of the console in other markets.