Nakata joined during the summer on a 12-month loan deal from Italian side Fiorentina and Allardyce is yet to decide if he will pursue a permanent deal.
He said: "Nakata scored against West Brom and I thought at that stage he was progressing very nicely.
"We hoped he was going to improve yet again but that doesn't seemed to have happened. The main reason he is at this club is because of what he can do with the ball, but that has been missing.
"That is dangerous for us because, through the season, the likes of Hide Nakata have to be firing on all cylinders for us to keep on winning matches.
"But this will be a good time for them, because they will be starting matches.
"I've got nobody I can let go from the squad unless someone pays a lot of money for whatever I've got, so there is a good chance for everybody here, including Jared Borgetti, to get into the team and stay there.
"Play well, score goals and win football matches and when the boys come back from the African Nations or injury, they won't get back into the team."
Meanwhile, Portsmouth have been quick to distance themselves from reports linking them with Bolton Wanderers defender Tal Ben Haim.
In a brief statement issued this morning, the club said: "Pompey have not considered a move for the Israeli defender and have absolutely no plans to do so."