TERA's been testing in Japan for five months now and has shown promise, with over 48,000 concurrent players logging in at one point. Even though the beta test is shrinking in players, NHN is making tweaks to the game to improve the experience for those who remain. These improvements include doubling the amount of free time for new players and cutting the cooldown time of dungeons in half while increasing the amount of loot dropped.
NHN Japan says that the population decrease will help to improve the game's performance as it progresses in testing: "Although the CCU has been decreased from the initial start, it is now more stable than we expected. The server consolidation is to promote better cooperative play."
The Korean beta test of TERA conducted a similar server consolidation last May.
[Update: While the developers are currently consolidating servers, TERA is no longer in beta testing in Japan. TERA launched several months back as a subscription-based game. We apologize for the confusion.]