Let me give you some details.
HOW HISTORICAL JAPAN WAS BEFORE 1185:
Japan, in the Nara Period (710-794) and Heian Period for a long time (794-1185) almost completely followed the organized model of the Tang Dynasty of the Chinese Empire. They even had a formal constitution-type document that set how the system was to work, and made it permanent.
Emperor was considered the central figure of the entire system, called Ritsuryo. In this time, Japanese emperors actually wielded power and participated in state affairs.
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Second came the Daijo-kan, or the Council of State. This was the actual executive office and main organ of government, the top-most and highest rank after the Imperial Yamato Dynasty. Although beneath the Emperors they wielded more power than him. There was a Prime Minister/Chancellor/Chief Minister and under him there were 3 major councillors and 3 top-level ministries. Beneath that came the second level of Daijo-kan, consisting of 8 ministries, including one that managed the Imperial Dynasty's affairs.
Daijo-kan was frequently monopolized by Fujiwara family who occupied a majority of posts, and misuse of power for their own favour became frequent. The system started breaking down by the time of Hogen and Heiji Disturbances, and it lost all power after the Genpei War and with the beginning of the Kamakura Shogunate. All those ministries and the entire Daijo-kan were turned into honorary ceremonial titles with no power at all. This was to remain the case until 1868.
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Running parallel to the Daijo-kan was the Jingi-kan or the Department of Worship. This state organ governed all the religious affairs in Japan as opposed to normal secular government of Daijo-kan which governed the state. The Jingi-kan was the one under which most ceremonial rites and rituals were performed. It was also responsible for setting regulations on rites and rituals, codifying them to some extent where possible. It was also responsible for constructing and maintaining temples and monasteries, holy sites and such.
Historically, Jingi-kan remained the only thing from the Heian era still functional under the Shogunates, and the rest of the Imperial Palace fell into ruin. And then it too was dismantled when Tokugawa Shogunate came into power. This resulted in no one being left to manage religious affairs, and the rise of independent monastic factions and such.
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Aside from that, as the part of Ritsuryo, Japan was divided into provinces. This came fully under the Daijo-kan and as a result, it too was sometimes monopolized by Fujiwara and the other three great families (Minamoto, Taira, Tachibana). And similarly, the whole provincial government was turned into a ceremonial structure with no power at all, alongside Daijo-kan, by the Shoguns. The Shogunate kept the provinces and borders, but they were now instead ruled by military governors, who then turned into hereditary military warlords under the Hojo Regency. Hence you see the Daimyo. The old province governors were now merely a ceremonial title given away and taken back at whim of the feudal lords.
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A major part of this was the court rank system. The entire Japanese Imperial Court was divided into 30 ranks combined into 9 major classes, based on Tang government. The higher the rank and class, the higher the ministry you can run for and higher your paycheck. The system supposedly worked fine until 9th century, when Fujiwara monopolized the first 6 ranks for themselves and no one other than their dynasty could attain rank above 7. The other three great families did achieve this after excessive bribing sometimes, but very, very rarely.
This system was, like everything else, turned into ceremonial and useless system that remained almost completely vacant during the Shogunates. It had no use, the four great families were dead and their successors were feudal warlords or nobles, and had no taste or actual willingness to occupy those court ranks.
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Finally come the castes. Unlike the Indian society which had 4 ranked castes and hundreds of subcastes in each of them, Japanese caste system was completely different. The entire Japanese society was divided into two castes, Ryomin (high citizens) and Senmin (low citizens). The Ryomin were the regular citizens, bureaucrats, officers, rich merchants, lots of urban-dwelling citizens and such. The Senmin were basically slaves and servants serving government officials and bureaucrats, tomb guards, Imperial Palace, market-bought slaves bounded to their masters and families (even commoner families) and such.
The Kunuhi (slaves) are the last two subcastes of the Senmin and are the slaves I mentioned. They were just like slaves in other societies that had slavery - Kunuhi were bought and sold like properties and had no families of their own. But there was one catch - the slaves could attain the rank of Kanko (public ministry servants and general public servants) at the age of 66 with the permission of their masters, thus becoming free (to an extent). If they managed to live on to the age of 76 (most Japanese did), the slaves automatically became free.
A Ryomin who committed many crimes in a row or a serious crime, would be forcibly demoted to a Senmin in the Kanko rank I mentioned above.
As much as I know of Japanese history after so much research, Ryomin and Senmin were not allowed to marry each other, like the forbidden inter-caste marriage system of India. But in some cases where Ryomin DID marry a Senmin, the child born out of the marriage would be a Senmin and not a Ryomin.
Unlike Indian society, Japanese didn't have a separate clergy caste. Priests were Ryomin and could be Senmin. The caste system didn't always apply to Buddhists, similar to India where Buddhists didn't have a caste system at all.
HOW JAPAN CAN BE IN THE GAME:
So, as you see, to implement Japan before 1185 they'll have to do a major code rewrite.
Firstly, Ryomin would form the overwhelming majority of characters in the game. Except for lowborns and peasant rebels. The two castes would have opinion penalties against each other. Secondly, if a Ryomin character marries a Senmin, the child would be considered a Senmin. Also, if a Ryomin committs a crime, when imprisoned he can be demoted to Senmin Kanko rank. Perhaps by a decision similar to those about castrating and blinding for ERE.
Also, polygamy AND concubinage should be allowed for males, at the same time. Emperors and nobles had multiple wives and at the same time they also had lots of concubines, who were promoted to wives in case of favouratism, love, or death of wives or just for the sake of it.
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Secondly, they'll have to implement a full-scale bureaucracy system with court ranks. Characters would start out at low ranks and perform tasks (through events) to eventually gain ranks. When they reach the highest rank within their class, they will be promoted to the next class level.
As they attain higher ranks, more and better ministries will be open for them. Paradox will have to make a system that allows 'applying for ministry' or 'run for ministry'. If the application gets approved, your character will get the post. If not, well, try again after some time. This would depend upon your rank, prestige, relations with the ministers and councillors, and the Imperial favour.
This makes for a heavy court intrigue that symbolized Japan from 710 to 1185. There would be lots of rumour spreading, nepotism, favouratism, rivalries and battle for courts. Eventually some characters will field private armies and hire goons and they may use this to fight or assassinate/murder rivals. This is where feudalism comes in.
All ministries and posts should have tasks, skills and events related to them. So a finance minister could embezzle money or an honest one could work hard to enrich Imperial treasury. A court poet with poor learning attributes would be disgraced or even outright fired.
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For religion, Buddhism would start out very small in southwestern parts of Japan, and eventually gain favour. They could have special mechanics about founding monasteries and sects. Some of them would be militant, and either fight against feudal lords or serve under them under certain conditions. Just like Holy Orders we have right now.
Jingi-kan would be like Papacy. It would appoint all the priests in Shinto temples and monasteries just like how Papacy decides who will be the next Bishop somewhere. Prominent monks and priests could gain special favour from Jingi-kan and can request money (just like Papacy) or new courtiers.
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Militarily, Heian and Nara periods are remembered as peaceful and prosperous times. Other than Ainu Emishi tribes to the north, there wasn't much fighting. But they should allow private armies/retinues to nobles because all the four great families fielded them in one way or another. They spread them out on their manorial estates as private guards to keep them secluded from public view, but in the end they could wield large armies of up to 80,000 easily given their wealth and power.
This is what eventually made the system break down. Nobles started fighting against each other for power when dynastic intrigue by marriage and assassinations was not bringing enough results.
It was in this time that the Samurai started to appear. Originally intended to fight the northern barbarians, they were instead employed by the noblemen as privately-funded troops. Eventually they grew in size to the point where the nobles eventually formed huge armies and overthrew the government and took parts of Japan for themselves to rule as feudal lords. Just as I said above.
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Honestly, they can make Sengoku 2 with Gempei War start date if they implement this system. And once they do that, it will be a baby's cakewalk to make China of any era from Qin onwards.
I will define how Japan after 1185 is going to work in a new post soon. Shogunate era had big differences in every aspect from Heian era.
