Can Japanese Catholics celebrate Obon?
“Ask an Apologist” However, it is a Buddhist religious practice and belief. I think that you have your answer right there.
It would certainly be all right to honor one’s ancestors during the celebration by laying flowers on the gravesite like we do here for Veteran’s Day. But then pray a rosary and offer Mass for the repose of their souls instead of praying to them as if they can do what Buddhist believe they can. We can ask the faithful departed to pray for us, but our intention as Catholics is very different from the Buddhist concept, as I understand it.