We're hearing the characters in English for convenience- Mikey just learned Japanese.
Being a Nicktoon for children, everyone obviously speaks English. But the premise raises some questions about if Mikey is actually good at learning another language good and fast and the show just never addresses it, or if everyone else around him is coincidentally bilingual. He suffers tons of culture clash yet maybe the one thing he is a genius at is beating Rosetta Stone for their money! Therefore, a justification would be that the characters in Japan (i. e.- everything besides that scene in Cleveland in the pilot) are actually speaking Japanese, but the show just makes us the audience hear it as English for convenience (like animal speak). This would also explain why no one ever uses gratuitous Japanese in the show! The pilot shows that he cannot read Japanese, but maybe that's a case of him being a Cloud Cuckoo Lander, and he may have learned to read it in episodes after that. In this parallel world of cartoon conventions, entertainment is considered more important to the culture than our own.
In fact, it's the core source for the economy. Mikey's rise to fame can only happen this way if people had bigger respect for animation. He meets the PRIME MINISTER, for God!- 's sake?
This show takes place before the 21st Century.
This world seems parallel to our own except every country is rendered in a two-dimensional cartoon stereotype of said country, where only hand-drawn or digitally-drawn cartoons live. CG shaded toons from the likes of Toy Story and beyond are never heard of and are nowhere to be seen, except for vehicles, which are made of cheap 3D models. The anime LilyMu is a typical shonen akin to Dragon Ball Z in an era where shonen is still fresher with the audience and still a record-breaking hit in ratings. DVDs are mentioned and are important to a few episodes. Cell phones look like older models from Motorola.- Though, there are hints to refute this. Some of the background characters are modeled off of anime characters that never existed then (this could've been before they went into show business themselves). In a montage, Mikey is seen using a Wacom pen tablet.
- Leads onto the following WMG
Mikey is actually Fry from Futurama.
He looks, and acts a lot like Fry. And it would make sense that this is pre 21st century because he'd be in the future. Every anime character to have appeared in an animated project in some way lives in the same universe as Kappa Mikey.
The same idea as Who Framed Roger Rabbit, where famous cartoons live on before and after filming their own subsequent films or shows. Some anime actors are so talented that they keep getting roles in later titles by disguising themselves in studio.- You mean every character in many anime shows is or was an Animated Actor on Lily Mu's auditioning? Certainly explains all those Expies we get of Ayanami and others...
Guano is under a curse.
One episode reveals that he is actually a guy in a purple costume, yet at the end, when he takes it off, it's just another identical costume underneath! He is afraid to wash it. His karaoke song "Purple" has the lyrics "I'm tapped inside this hue you THINK is a suit"! Obviously.... Guano was a regular human put under a magical or supernatural curse prior to the events of the show, and he is now doomed to live inside a tight, purple Pokemon costume, and he can't even return to normal by taking it off, because, as we know, another identical costume will just appear in its place. This is probably where all his phobias came from, as well as his general nervous behavior.