I wonder how other large Japanese developer-publishers handle stuff like this? And also how Western developers deal with translations in other countries... although I imagine there is less income to be made in those kind of situations.

This seems like a fairly unique situation based on my brief research, in that they are translating a game for one console but the game is now being released on a different console in the language being translated to. Not sure I can find any kinds of precedent for this one.