You can’t say it wasn’t unexpected. Nikon and Canon have taken a serious hit in market share, at least in Japan, to the compact interchangeable lens cameras that Sony and Olympus have been bringing to the market. I’ve written about these things to some length — call me old and curmudgeonly but I’ve yet to see one that really strikes me as anything other than a solution in search of a problem. They are popular though, and that means if you want to continue to be profitable you have to grow into the market or be left behind.

Now while I thought the Sony NEX-7 had just about got it right, I’m not sure the Nikon 1 gets it at all. The problem Sony had, at least as far as I’m concerned, is the user interface and the lack of a viewfinder. What they had right, was a big 1.6x crop-factor APS-C sensor. What the Nikon’s lack is, well, that big APS sensor. And while Nikon has almost always done better with a Sony built sensor than Sony can do with that sensor, it’s also almost impossible to beat a larger sensor.

The Nikon CX, what they’re calling their new sensor, so far as I can tell, is a 2.7x crop factor sensor. And while it’s considerably bigger than a high end P&S like the Canon G12, it is smaller than the 4/3rds format used by Olympus. In fact, I’d almost rather have seen Nikon join the 4/3rds consortium and build to that standard with their own sensor. It would certainly provide a wider range of lenses available on launch, plus Nikon would likely pick up some μ4/3rds lens sales to non-Nikon camera owners, which is just a plus.

The system debuts with 2 bodies and 4 lenses and a handful of accessories. The two bodies appear to be roughly entry level and slightly more advanced in terms of features; though they both shoot 10 FPS and 1080p video. The lenses cover from 28-300mm in 35mm terms, with a 28mm f/2.8 prime thrown in for good measure and the zooms have optical image stabilization built in.

Let me cut to the chase, the lack of lenses is understandable, it’s a new system. The two bodies seem solid enough for causal photographer cameras. That said, there are definitely going to be compromises; the bodies are small (the J1 is smaller than an Olympus EPL-3 and just smaller than the NEX-3), have the smallest sensors of any of the interchangeable lens compacts on the market currently, and lack the physical controls I’d expect in a body aimed at serious photographers.

That said, Nikon has finally brought their embedded phase detect AF system to fruition in a product. I’ve considered this the future of AF in mirror-less cameras since I read the patent, and I bet it’s going to give the V1 and J1 a huge advantage in AF speed over the μ4/3rds and NEX competition. In fact, it’s probably a safe bet that if you want a compact camera for photographing the kids at soccer practice, this will be the one — lots of reach and a AF system that can keep up with sports like an SLR. This just leaves Canon as the only major camera company who’s yet to announce a compact interchangeable lens system.

For full specs, check out Nikon USA’s 1 System page.