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I second the point that this is hardly new as far as Japanese games go. In a lot of Japanese game stores the 'dating sim' games are right out with everything else, bare breasts on the box and all. There's a whole gamut from cutesy to hardcore. They even make these for girls, with stables of rainbow haired 'pretty boys' to choose from. Japanese girls and women buy their fair share of sexually themed games and comics, and they make them as well.
The Japanese have a very different idea of the boundaries of depicitions of sex in pop culture for young people. While they have their own issues of course, the artistic freedom is a wonderful thing.
I also thing that it's worth noting that the Japanese didn't have Witch Trials and that Christianity is a very minority religion in Japan. The witch thing is probably not a whole lot more than a cute magical girl costume to the developers. Kind of like a french maid or naughty nurse. Also, there are lots of witch themed anime that, serious or humorous, have no more to do with witch trials than 'Bewitched' or 'Sabrina the Teenaged Witch' do.
For the people who are continually upset by the subject matter of games currently on the market, would you please enlist yourselves in the game industry and start designing and producing the sort of games that you would like to see? For everyone person who loves GTA or Silent Hill, there's somebody else who loves Katamari Damacy or the Sims, and it's good that there are all these choices.