This is a common question Westerners have. Japanese characters in anime, manga and video games, they say, "look" Caucasian. That is all a matter of perspective, no?
In a post titled "Why do the Japanese Draw Themselves as White?", blogger Julian Abagond argues that the Japanese do not draw themselves as white. Rather, Westerners (Abagond specifically says "Americans") think that they do.
"The Japanese see anime characters as being Japanese. It is Americans who think they are white," he writes. "Why? Because to them white is the Default Human Being." To illustrate his point, he includes this image:
Abagond says most Americans will look at this image and see a white person, because, he argues, Americans see the white as the default.
According to Abagond, "For them to think it is a woman I have to add a dress or long hair; for Asian, I have to add slanted eyes; for black, I add kinky hair or brown skin. Etc."
The other must be marked, he contests. "If there are no stereotyped markings of otherness, then white is assumed."
However, in Japan, white is not the default. Japanese is. Thus, there is no need for them to "look Asian", because no matter how ridiculous the characters look, everyone will assume they are Japanese.
The same thing is true in America. To make his point, Abagond points to Marge Simpson. "After all, why do people think Marge Simpson is white? Look at her skin: it is yellow. Look at her hair: it is a blue Afro. But the Default Human Being thing is so strong that lacking other clear, stereotyped signs of being either black or Asian she defaults to white."
And physical features like huge round eyes, yellow hair and white skin are inconclusive in Japan for "whiteness": The eyes are unrealistic. Hair color is not limited to yellow as there is blue, green and purple hair. Small noses are not indicative of "white" or Westerners in Japan big noses are. And white skin is not exclusive to Caucasians as it has been a symbol of beauty in Japan since before Japan had contact with Europeans.