But isn't Nintendo overseeing the localization? Because if that's the case, then they have final word on everything.

http://www.technobuffalo.com/2016/04/22/atlus-localization-for-tokyo-mirage-sessions-fe/

"Tokyo Mirage Sessions #FE was localized by Atlus in a way that is consistent with the localization work they do on games they publish."

I don't think that Nintendo released a public statement like this if this wasn't true. I mean, you don't lie about one of your biggest 3rd party supporters XD. The final statement makes me believe that they adapted the content so they can release the game rated T in all regions. Providing this game is already very niche, I don't think it'll precisely harm the game to reach more user base. 

Oh no, no cleavage, this game is gonna automatically be terrible!!!

D:

Yeah I can understand changing a few things for certain territories, but I doubt that the game would be rated M just because of the cleavage here and there that keeps being censored. Anyways you're right Atlus fans won't really care about it, since it's just a minor censor.

I'm not sure about that, I remember some games being rated M for some minor cleavages and fan service. The rating agencies are getting more... harsher every day, and you have to make sure that you pass all the rating agencies of all territories to achieve that rated T. It's not so easy as it might look. Another option would have been keep the game rated M. I guess this is a choice based on reaching more people. I mean, there are game in Nintendo systems which are... very sexy (Senran Kagura, for example). 

I knew this thread was gonna happen when I heard about the newest video. Wasn't disappointed

they are

But Senran Kagura is rated T and much more risqué and that wasn't censored in the slightest. At least the 1st one.

If staring at their cleavage is not part of the core gameplay, I don't want to know what is.

It's a turned-based RPG, right? Isn't that supposed to be the core gameplay?