Square Enix's Japanese technology division is working on a brand new multi-platform engine, one that's fully compliant with DirectX 11, and is currently compatible with PS3, Xbox 360, and of course PC. The "Luminous Studio" engine is inspired by the crystals from Final Fantasy, and is likely to replace the current generation Crystal Tool engine.
Luminous' focus will be on animation. According to a report by Andriasang, "unnatural animation will stand out" in the next generation, thanks to higher quality lighting, shading, and modeling. In addition, Siliconera reports that artificial intelligence will be another focus. The plan is to integrate AI into the engine, to have "scalable AI that recognizes game scenes."
The engine is being developed separately from IO Interactive's Glacier 2 engine, and Crystal Dynamics' CDC engine. However, the Japanese team has admitted traveling to IO Interactive and Eidos Montreal to get a better understanding of those studios' technologies. And although it is being developed as a "full engine," like Unreal Engine or CryEngine 3, Square Enix has no plans of licensing it outside of their internal development studios.
Currently, Square Enix is planning on showing off a tech demo of the engine in late 2012 or 2013. There's no games attached to the engine yet, but information should be forthcoming in the next year as well.
Here's a very brief real-time demonstration of the engine: