From what I understood, the family is supposed to live in Tokyo (or its suburb), and the MC went to the police academy in Osaka and lived there a decade or so. Don't know why the family members are caucasian, nor why the house and its neighborhood are western stylized.
But we have asian characters in the last flashback (in Osaka) and also japanese-stylised environements.
It's not even about the main cast being white. That's obviously not so farfetched since we are mainly looking at MC's family. It's just that the game never showed in any way that the setting was Japan before chapter 2. In fact, everything pointed towards the assumption that it's in a western nation. There were no Japanese styled architecture or streets. The high school MC went to was certainly not Japanese looking. It had lockers outside and big wide hallways like a typical American high school. Japanese schools don't look like that. The girl was not wearing a Japanese school uniform. We don't see any Japanese people, although we didn't really see any pedestrians or people in the background, to be fair.
Narratively, it also never incorporated the setting into the story. You would think it's a rather unusual or peculiar thing that would make an impact on MC's upbringing or backstory. Japan is extremely homogeneous and a white family that placed their roots there should have some sort of story about how they ended up there. Plus, the struggles to fit in or whatever is never even explored. Somehow, every important person he happens to meet is a foreigner and that's also never brought up. Like you would think meeting another white girl in a Japanese high school would be kind of a big deal. A foreigner, let alone two of them, being in the same police department would also be kind of a big deal.
I don't think anyone is saying the story would be worse if it's placed in Japan. The issue is that there was no indication whatsoever that this is the case. Worse yet, it doesn't really make sense based on the initial story, dialogues, locations, and renders that this was Japan all along.
Sure, it's not really a huge deal as far as banging some family is concerned, but it does make you question the validity of the non-porn side of the story.