Wrong, sex is bad in Japan.
Meanwhile there’s adult games galore on the U.S. Steam store.
It's more complicated than that, particularly when it comes to videogames.
Sex is not "bad" in Japan, far from it. The advertisements for prostitution in the more wealthy/business centric districts of cities are typically far more forward and obvious than what you'd typically find in the west. However their relationship with sex in general is a complicated one, increasingly so in recent years.
When it comes to ratings specifically there are circumstances where they will allow nudity/sex, however it will guarantee you a Z rating. Being Z rated means the game gets shoved to the back of stores at retail in small restricted areas that children are not allowed to access at all. Many retailers will even opt to not even bother with Z rated products at all. Example:
Japanese retailer Nojima has announced that it will stop selling games rated "CERO Z" (18+ according to the local system) in its stores effective immediately.
techraptor.net
So what it means is a dramatically reduced retail presence for the game along with next to no advertising which overall will have a negative impact on sales.
As for violence, they are far more strict when it comes to violence/gore/blood involving humans. Decapitation/dismembering of human subjects is a big no-no and will get your product restricted if not outright banned. They regard that an issue of public safety and it extends across to movies. You can read about the incident that sparked that here:
en.m.wikipedia.org
Skip to the aftermath section for the specifics on what changes were made as far as media content goes.
If you've never been to Japan before I'd strongly suggest visiting, particularly while the Yen is still weak. If you allow yourself to get lost in the culture and speak to the locals a lot of stuff that might seem strange from the outside starts to make sense.
