I read some articles in which it was revealed that Arkane thought about http://www.gameinformer.com/b/news/archive/2013/03/28/dishonored-almost-took-place-in-japan.aspx, but the idea was abandoned because they felt they didn't know enough about the culture. They went with England instead, but eventually it turned into another world.

The beauty of an other world as a setting is that you aren't bound by the real world cultural realities. You can make your own setting loosely based on Japan, much like you made Gristol loosely based on England. It is true that some cultural knowledge would be needed to create a place based on Japan in the world of Dishonored, but someone can be hired for their insight in Japanese culture (like an actual Japanese person).

A steampunk (or whalepunk) fictional version of medieval Japan is easily one of the most interesting settings I have ever heard of. Please make it a reality next game.