So they killed Japan Studio for this?
They didn't kill Japan Studio, they just restructured, rebranded and split them as Team Asobi and XDEV Japan.
They're the ones behind Death Stranding Director's Cut, Stellar Blade, Rise of the Ronin, Astro Bot, Convallaria, Lost Soul Aside, Death Stranding 2 or Physint.
This is seriously incredible. How do you work on a project for 4 years, to only then realize you wouldn't be able to support it? That's a huge management issue. These things should be ironed out in pre-production and then amended as the project changes. But how do you get completely caught off guard after 4 whole years?
They didn't say that weren't able to support it.
Game projects and the market evolve during development, and almost always they are very different when close to release than when in preproduction. Quite often, the scope of the project also grows a lot during development. Even in the top teams, with the best and most experienced management, there are frequently delays and ran out of budget.
Not because of bad management, but because to make games is not like to work in a factory. It's a creative process where it's very difficult to predict how the market will be in 5 years. Even less -like in this case- where the team makes a type of project quite different than the one they are experienced on.
In this case they saw that support it accordingly after launch was going to take some resources that they wanted to spend on the multiple SP games they also have in the works. They grew to work on minimum 3 big new projects at the same time, and maybe could grow more for a while. So decided to kill the GaaS title and focus on SP games, where the team is more experienced now that they saw they had the GaaS side better covered with other titles (GT, MLB, Helldivers, Destiny etc).