UMD Passport program's absence in the west boils down to pricing and demand, according to Sony senior VP Shuhei Yoshida. In a recent interview with Wired -- the same one in which he gave a progress report on The Last Guardian -- Yoshida explained that the market for PSP titles is much different in Japan.
In Japan, said Yoshida, the PSP is still doing well. Many customers who might pick up a Vita are "also interested in playing PSP games that they might purchase before Vita comes out," he noted, adding that many such customers may not choose the (Vita compatible) digital versions.
Furthermore, digital PSP releases in the west are available for "a really reasonable price." He mentioned Final Fantasy Tactics as an example, which is a $10 download in the US (cheaper than the iOS release!). Yoshida states that PSP games are much more expensive in Japan, so paying between $5 and $10 for a digital copy in addition to the UMD is a better value. "But when the games are already sold at a lower price in the U.S.," he said, "we see less value in introducing that kind of system."