Not the device itself. The Natal peripheral is a small, slender add-on. Microsoft has apparently told a group of journalists, including Techflash.com, that some space is required to use the motion controls.
To quote Techflash:
To be precise, you'll want to clear an area extending at least 4 meters (a little more than 13 feet) away from the television. That's the back edge of the space to be taken into account by the Natal sensors. In terms of width and height, the field of vision naturally expands as it moves from the Natal device to that back edge, ending up a little more than 4 meters wide and 2.7 meters high (about 8 feet, 10 inches).
Those were among the tidbits passed along by representatives of the Natal team during a briefing for a group of reporters and bloggers Monday on the company's Redmond campus. The session was part of a day-long technology discussion held by Craig Mundie, the company's chief research and strategy officer.
The Japanese internet has taken particular notice of the "area extending at least 4 metres". The below image has appeared online:
The image is from Microsoft's original Xbox days, but it does show the disparity in the size of livings. The American living room is considerably larger than the Japanese one. The Japan abode shows a kitchen and a six-mat tatami room. This is actually a small apartment for either one or two inhabitants. It is not for families like the American house above, so the comparison isn't quite correct.
What's more, depending on location and price, Japanese houses and apartments can increase significantly in size. While in big cities Japanese people are packed into small dwellings, those living in the suburbs or the countryside have far more spacious (and comfortable) housing - at often, lower prices.
I now live outside Osaka City, and my current house has a large living room. But still, it is large for Japan. And the only reason it is large is because it was actually two separate rooms, but a wall was knocked out, turning it into one large room. Clearing a space to play Natal should pose no problem.
That being said, it is not large compared to American living rooms. Friends of mine who own apartments and houses in Osaka City will be hard pressed to clear out the aforementioned 4m between themselves and the television.
At this past year's Tokyo Game Show, Microsoft had small booths were those in the Japanese game industry could check out. Honestly, I don't know whether or not the boxes had four meter space between the television and the player, but the booths were not that large.
Kotaku has reached out to Xbox Japan regarding this.