Japanese have actually quite a good track record in real-time physics simulation. Remember Tomohide Kano rigid body demos in 2000
? Or Takahiro Harada GPGPU Physics demos/movies
, discussed in his article in GPGPU Gems 3 and shown at the SIGGRAPH 2007 Electronic Theatre?
You can expect better from the Octave Engine This Tekken 6 movie is existing technology, but their upcoming tech is much better (inside information).
If you look carefully, you will notice that the Octavia movie is actually showing Takahiro's GPGPU rigid body demo, recorded at Tokyo Game Show. Takahiro also has much more promising technology on his website
, try out his real-time GPGPU physics executable demos (fluids, cloth, rigid bodies) on a recent NVidia 8800 card!