Quiting the biggest & one of the most crypto-friendly countries makes no sense whatsoever.
Something smells at Kraken.
No suspicions here Kraken is a foreign company and having business internationally is really a tough one. One of the obvious reasons why Kraken pulled out of the Japanese market aside from operational cost, taxes, and competition is the more strict implementation of new and stricter set of regulations laid out by the government because of the recent hack in their exchanges. This made the company harder to keep up as it will be harder to maintain customers.
Their only option as of right now if they want to enter the Japanese market is to venture out with domestic company who is willing to manager their operations, at least that is how I view their contingency plan.