I would say Japan is Tekken's most Niche region nowadays, but Tekken 7 still sold like 150,000 Copies there, which is okay, and back in the day, Tekken 1 and 2 were in the Millions (Unsure on the later games, but I'm sure Tekken 3 was also very high in Japan)
Anyways yeah Kazuya does get underplayed. I think the reason he probably gets underplayed is that perhaps of all the characters in FP2, he's the least associated with Nintendo. Tekken is not a franchise that's on Nintendo systems often. That's probably the major reason he was the E3 Reveal, a Event which has gamers from all Regions of gaming watching instead of Nintendo heads and such. Kazuya is gonna appeal to Playstation Players, and perhaps also PC and Xbox Players also, more than he is Nintendo fans
Steve and Sephiroth in Comparison I think have more overall crossover with the people that have been paying attention to Smash already, Especially Sephiroth since Cloud is already in the game. Also their Franchises are bigger than Tekken also, though I will acknowledge that remember FF7 is only one game in many Final Fantasy games, which have their own characters and lore, and their games are more readily available on the Nintendo Switch as of now
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I had a Giant Essay as to why I think CP11 has more evidence in it being more Hype than not Hype, but I figured people didn't want to read it, So I'll just give my Opinions
I think if they aren't going to go for a character that is from a Game people are/will be playing now (and the only characters this would apply for is Pokemon, not even Gen 8, and Nahobino, who I think has alot of Circumstances going against him) Then it's likely the character is going to be one that Main appeal is to the Audience already invested into Smash, or just Nintendo
This character I don't think is Gonna be a Steve or Kazuya and have new appeal to New audiences, and if it does, it's gonna be an audience already on Nintendo. I think this Final Character could be closer to Sephiroth in this regard
I don't think this character is gonna be Niche. FP2 could have just been the 5 characters we already got revealed, and I think Nintendo would have just been fine with that. Adding a 6th character to FP2 means more Costs in Development, over longer period of time, and also the fact that less people are invested in the product as time goes on.
So the fact they had 6 Characters tells me that Nintendo and/or Sakurai had Large confidence in this character being worth the Development time and such. While they do want to sell the Pass, they also want the characters to sell individually, Especially since characters in Smash Fighter Passes tend to appeal to Different audiences from each other