From GM Brian Cashman in a statement: "We unfortunately could not come to an agreement with Hiroyuki. We wish him the best of luck during the upcoming 2012 season."
We heard earlier in the week that a deal was unlikely. The Yankees view Nakajima as a bench or utility player, and intended to pay him as one. The Yankees were only willing to offer a one year deal, while Nakajima was looking for a multi-year contract.
Last season, Nakajima hit .297/.354/.433 with 16 home runs and 27 doubles in just over 630 plate appearances for the Seibu Lions.
Because the Yankees could not come to an agreement with him, they do not have to pay the $2MM posting fee.
It looks as if the Yankees may try to re-sign Eric Chavez and continue to use Eduardo Nunez in bench and utility roles.