But the X-men are also extremely popular in Japan, to the point where it even had it's own anime for Christ's sake. This is just Capcom trying to damage control because Marvel's preventing them from using anything that isn't part of the MCU for whatever petty reason.

The X-Men were not cancelled. They still have plenty of mutant titles on publication right now such as X-Men: Gold & Blue just to name a few. They just stopped promoting them and have the Inhumans being pushed instead.