The AP is reporting that Microsoft will launch a $260 version of the 360 in Japan (similar to the Arcade version in the US?).

http://www.washingtonpost.com/wp-dyn/content/article/2008/02/04/AR2008020401484.html

Actually, it *is* the Arcade.
256 Mb memory card, no HDD, 5 bunded Arcade games...
The biggest clue, though is :
"The entry-level offering goes on sale March 6 for about $260 _ about a fifth less than the least expensive Xbox 360 now costs in Japan. The stripped-down version went on sale in the U.S. late last year for $279.99."