I didn't watch the video but I skim read the YouTube transcript.

The video doesn't propose any single explanation, just a series of events all of which arguably set back Japan's indigenous software industry. A few of the incidents it mentions include (my summary below is more based on my own knowledge of the topic, than what the video specifically mentions):

Fujitsu and Hitachi cloned IBM mainframes. So did lots of other companies. At the time they started doing it, IBM was (intentionally) releasing their software into the public domain. However, in 1969, IBM announced they'd start copyrighting their software. Initially they still released the core OS (primarily MVS) into the public domain, and only copyrighted add-ons. However, as the 1970s progressed, more and more new functionality went into the copyrighted add-ons, while the public domain core received only limited enhancements. Finally, in the early 1980s, they put the whole OS under copyright. This left Fujitsu and Hitachi in a difficult position. They were used to getting their mainframe OS from IBM for free, and suddenly they couldn't legally do that any more. Legal choices for them would have included: (1) fork IBM's operating system and create new enhancements themselves (either clone IBM's copyrighted enhancements by clean-room engineering, or design their own incompatible enhancements), (2) negotiate with IBM for a license (unclear if IBM would agree, and may have cost $$$), (3) license an alternative operating system (e.g. UNIX), (4) build their own OS from scratch. But none of those options appealed to them (or maybe they tried some and it wasn't working out), so they decide to go with option (5): illegally copy IBM's copyrighted mainframe operating systems. They used the fact that IBM still shipped the source code for much of its copyrighted software to customers, and somehow got customers to (illegally) hand that source code over. They made rather trivial changes to the source code to try to hide the copying–for example, Fujitsu renamed a lot of IBM routines whose name started with the letter I, to start with the letter J instead. They searched and replaced IBM copyright notices with their own. They even bribed IBM employees to give them IBM confidential material (the IBM employees accepted the bribes as part of an FBI sting operation). And IBM found out, and sued both Fujitsu and Hitachi, and the settlement of the suit required Fujitsu and Hitachi to pay IBM hundreds of millions of dollars, and also banned Fujitsu and Hitachi from continuing to sell the software outside Japan (IBM agreed to let them continue selling it in Japan, in exchange for them paying licensing fees.)

Other stuff I know about this topic (not in the video): In the 1980s and early 1990s, Fujitsu mainframes were quite popular in Australia, but due to this settlement, by the end of the 1990s, basically all of Fujitsu's Australian mainframe customers had either migrated to IBM mainframes, or else to non-mainframe platforms. There are still Fujitsu and Hitachi mainframes running in Japan today, but they are deeply legacy, basically stuck in the 1990s – they didn't follow IBM's transition to 64-bit in 2001. Fujitsu and Hitachi weren't the only mainframe vendors faced with this problem, but other vendors sought to solve it within the confines of the law. In the US, Amdahl had the same issue, but it decided to focus on their Unix variant UTS instead of MVS. (Amdahl did have an internal project to build a clone of IBM's MVS, apparently based on legal clean-room reverse engineering, called Aspen, but it got caught in development hell, and Amdahl cancelled it before they ever officially shipped it, although possibly a few customers got beta test versions.) Germany's Nixdorf had a fork of IBM's DOS/VS operating system (for low-end mainframes), which they got by acquiring the American company TCSC; they ported the Unix clone Coherent to run on top of it, before killing it off in the late 1980s when Nixdorf decided to give up on mainframes and focus purely on Unix instead. Other mainframe vendors didn't have this problem because their operating systems were not based on IBM's – for example, the other Japanese mainframe vendor, NEC, their mainframes run a fork of GE/Honeywell/Bull's GCOS operating system (ACOS), which NEC legally licensed.

Another incident the video discusses is the TRON project, which was a Japanese indigenous standard for operating system APIs, endorsed by the Japanese government, conceptually similar to POSIX. It included both variants aimed at general purpose computing (BTRON) and embedded systems (ITRON). However, this frightened the US software industry, which convinced the US government to declare TRON a "trade barrier". And that mostly killed TRON as an operating system. TRON didn't die completely, it still sees some use in embedded systems even today (the video mentions the Nintendo Switch Joy-Con controllers run it), but it never achieved the original vision of becoming Japan's standard operating system. Instead, Microsoft Windows did.

And then there were also macroeconomic issues (Japan's real estate crisis in the 1990s), and cultural issues – it mentions how the Japanese government encouraged Japanese industry to focus on copying successful Western technologies, even improving them incrementally in the process, as opposed to coming up with fundamentally novel technologies of their own. That approach served Japan very well for industries such as cars, but doesn't work so well for the software industry.