Well, since Ashley wears her shoes indoors it cannot be japan, the city itself looks like an American city.
On the other hand it does have Ninja's, and we all know Ninja's are a japan thing. I'm not even sure if it's the same Earth as our own, since the Mario universe is much different than our own. Mario was warped to a new universe where all logic is lost.
The world is made in a different way. Who knows, the city might be run by Mario himself. There are other cities in the Mario world such as Mushroom city, so it's set in the Mario world, the city is run by a princess probably. Which in the near future Ashley will take over.
Like most Mushroom World locations, it's not really based on one culture, but a huge mishmash of stuff from all over the world. So some elements are Japan inspired, some elements US inspired, some elements inspired by European countries, etc.
