Even after the PS2 was released, plenty of developers continued to release games for the PS1 for some time. This game fits in that timeframe - and probably got canceled in-universe due to the disc-space issues and lack of funding to support a transition to the PS2.
Not to mention the near guaranteed failure of the game since it's an unpopular genre on the platform it's intended for.
It makes sense if you consider it for long enough.