In a recent interview with Famitsu, Tecmo president and co-founder Yoichi Erikawa confirmed that the game still existed. "We just finished the alpha version of the game," said Erikawa, adding that work on it "is continuing steadily."
Slated for the PS3 (eventually), Ni-Oh! follows the journey of a half-Japanese, blond-haired samurai in 16th century Japan. There was supposed to a movie version that tied into the game, but that was apparently canned.
Back in 2009, Koei apologized for lack of updates about the game and said it was still working on the title. In 2010, Koei revealed that Team Ninja of Ninja Gaiden fame would be developing it. And in 2012, Koei stated that the game just cleared its alpha version. Progress!