Don't just blame this on the Japanese; American companies have done similar things. I can't post any links for fear of attracting moderator wrath, but similar products are available in the United States.
The U.K. has done it as well. They're the only western country I could find that imports Utensil Race products (... don't ask me how/why I know this).
Personally, I attribute scenarios like this to three things.
1. Japan, not being a christian nation, having much more relaxed views on sexuality than Western countries.
2. Japan constantly striving to improve their technology. Say what you like, but making synthetics feel like human flesh is no mean feat of materials science.
3. Japan taking much better care of their hopeless, undersexed nerd population than Western countries. Admit it, if you were having a hard time getting laid (and I mean a REAL hard time), you would totally buy this.
And finally, I'm pretty sure the boobies aren't intended to be worn by the player, but are supposed to be installed in a blow-up doll of some sort (again, don't ask...).