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Interesting question. I voted "Can't Say" because, honestly, I just haven't pursued Japanese (or Asian) horror as much as I did a couple of years ago so I think I may be out of the loop.
That being said, here are a couple of thoughts as to why people may consider it on a decline...
Directorial shift of Focus: One of my absolute favorite Asian horror directors is Chan Wook Park (though some people may argue that his Vengeance Trilogy is NOT horror, I disagree) and his most recent contribution to cinema was Stoker, which while is definitely horror, it is an English language film as opposed to something that we may consider "Asian Horror." Kim Jee-woon (Tale of Two Sisters, I Saw the Devil) last put out the English language action movie The Last Stand. Same goes for Joon-ho Bong, director of The Host, Mother, and Memories of Murder - His most recent film venture is the English language film Snowpiercer - I wonder if we are going to see a trend in Asian directors putting out English language films to try to expand to the Western Market. If they're putting out English Language films then they won't be contributing to the Asian Horror Cannon. Granted, those are all Korean directors, so I'm more speaking of the decline of Asian Horror in general as opposed to Japanese Horror specifically.
Western shift of Focus: I think that the reason why Japanese horror had come to a head is that the Western Film Companies were churning out remakes - Pulse, The Ring, The Ring 2, The Grudge, The Grudge 2, Shutter, etc... Admittedly, I started getting into Japanese horror after watching the remake of The Grudge. And when the West started to make that trend popular, the East responded by producing more - More sequels. The Western shift of focus (I believe) has been around Demons (Paranormal Activity, Insidious, Sinister), Possession (The Conjuring, The Last Exorcism) and while I'm sure that J-Horror has movies that fall within those sub-genres, this shift of horror focus has turned away from the dark-haired vengeful Onryō.
Eastern shift of Focus: When I think about heavy hitters in J horror, I think of Takashi Shimizu (The Grudge, both Japanese and English versions), Hideo Nakata (The Ring, The Ring 2, Dark Water), and Takashi Miike (Audition, Ichi The Killer, etc.) - For the two aforementioned directors, if you look at their pages on IMDB, they are not putting Onryō-themed movies right now (both seem to have focus on TV) and as for Miike, one might argue that his only contribution to the Onryō sub-genre was within Three... Extremes and One Missed Call (his movies seem to fall more into shock or body horror - Or countless other genres that he explores).
So if we're considering "J-Horror" to be Onryō movies, I think we can contribute the "decline" to a shift of focus all around and the fact that sub-genres ebb and flow like anything else. "J-Horror" was hot for a while and now Demons seem to be hot. Speaking of Asian movies in general, it looks like directors may be shifting to more Western films or shifting focus onto films or TV ventures that don't all fit into the same sub-genre or horror.
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