When the news surfaced that Steve Jobs was talking to DoCoMo (NYSE: DCM) president Masao Nakamura, it was widely assumed that bringing the iPhone to Japan would be a slam dunk for Apple. After all, Japan is the land of nearly 98 million mobile users who routinely pay $300-$400 for a handset and do all sorts of things on their mobiles like paying for purchases, watching TV and even reading novels. Plus the Apple (NSDQ: AAPL) brand is popular in Japan, and the iPod is already a big hit, with half the market share for portable music players.

But what if in mobile-crazy Japan, the iPhone gets lost in the shuffle of high-tech handsets? BusinessWeek questions whether Japan “needs the iPhone”, noting that in a market where gee-whiz gadgetry is the norm, users won’t be so starstruck by Apple’s handset.  They’ve already got phones that let them send e-mail, browse the internet, shoot videos as well as photos, have built in GPS, and double up as credit cards and commuter passes, and can even safeguard personal data using fingerprint or face-recognition technology. Even with a 3G version of the iPhone—which will be necessary in Japan, as it has already upgraded from 2G networks—analysts are skeptical that this will be enough to please the Japanese consumer. As BusinessWeek points out, all it has in its current form to differentiate it from other handsets in Japan is its 3.5 inch touch screen, and access to online applications such as YouTube and Google (NSDQ: GOOG) Maps.

Talks with DoCoMo are also hitting snags, and not just over the familiar sticking point Apple’s had with other carriers of how much revenue share the carrier is prepared to give to Apple to bring in customers. DoCoMo is said to be wary that caving into any revenue share deal would open the floodgates for other handset makers to demand similar cuts. Japan’s number one carrier is apparently nervous over the idea that iPhone users will obviously want access to the iTunes store, bypassing their own i-mode portal site that already offers music downloads, as well as other services such as shopping, and investing services—all high-margin earners. BusinessWeek quotes an anonymous telco industry executive who notes, should this happen, “DoCoMo would be reduced to the dumb pipes they live in fear of becoming”.