You mean we can finally meet those Vikings that Ash said that live in Minnesota in the first movie? Or even meet Lt. Surge outside of Vermillion City? Awesome.
But seriously, there are only 4 big islands in Japan (and Okinawa, but that got covered along with Kyushu with the Hoenn region). Kanto is the South Eastern part of Honshu (Tokyo area), Johto is the South Western area of Honshu (Kyoto) and a good chunk of Shikoku, and Hokkaido is mostly covered from the Sinnoh region. The Izu and the Bonshin Archipelagos are present with the Sevii Islands. Orre (Pokemon Colosseum's region) is in the area that's north of Shikoku (despite being a desert). Fiore (First Pokemon Ranger game's region) is supposedly the North Eastern part of Honshu, but I don't remember it being that big in game. (Source:
Bulbapedia and
Wikia's Pokemon section [for the Orre and Fiore regions]
So if this game's region was to be based in Japan, it only really leaves the western 2/3s of Shikoku, and the one little pennisula of Hokkaido that wasn't seen in Sinnoh, so Isshu wouldn't have been very big. So it would have had to have been moved to some other country.