The current generation has seen Koei rise up from the ranks of mid-tier game publishers on the strength of smash-hit games like Dynasty Warriors, and the Japan-based publisher shows no lack of ambition in its next-gen plans. It hopes to create new games that have a global appeal, and one of the first steps toward realizing this lofty goal is the opening of a new production studio in North America, aptly called Koei Canada. The new studio's first game will be a PlayStation 3 combat / racer called Fatal Inertia, which Koei debuted here at TGS.

The action takes place in the 23rd century, where rally racing, street racing and demolition derby have fused into an exciting and dangerous new high-speed aerial sport. Racing, precision flying and dogfighting will all play key roles as you zip through beautiful scenic landscapes in your sleek metallic aircraft.

Though it has the look of your average futuristic combat racer, the designers intend to use the considerable computational abilities of the PS3 to give Fatal Inertia a flavor all its own. A lot of that power will go into the physics simulation, which will be the keystone behind the game's combat system. Rather than use your ship's weapons directly against your competitors, you'll be able to use them in creative ways to affect the environment to your gain ... or your enemy's distress.

Though the game is still at a very early state, Koei showed both real-time and CG demos to help illustrate the concept. The main environment was a dusty, Grand Canyon-like region, where strategy centered around causing landscape-deforming rockslides with your machine guns. Another creative weapon was a grappling hook, which was used to tether an opponent to a rocky outcropping, leading to a rapidly spiraling death. There'll also be smoke screens, some sort of rear-firing gun, and remote-controlled rockets that can attach to your opponents' craft to provide unwelcome thrust at just the wrong time. Michael Bond, the game's lead designer, promises that you'll find new ways to use your arsenal each time you play. That's a tall claim, but it's nice to see Koei Canada is aiming high.

Fatal Inertia will support a full range of single and online multiplayer modes, including team-based racing and battle varations. There'll also be a detailed craft customization system, to let you tweak your ride as you see fit.

The real-time demo was brief and ran on PC hardware. The framerate was a bit stuttery and the geometry moderately detailed. It was very much a prototype than any sort of final game, so we'll have to reserve judgement for a real build. In the meantime, Koei's new studio seems to be on solid footing with its first project. We'll see just how solid when we finally get to check out a playable version closer to the PS3's launch.