I think many of you are giving a Japanese dev too much credit. Do you know how unknown LGBTQ issues are in Japan? Transgender and nonbinary people are even less understood than in the west.
I have a couple examples. My friend has no problem with having a female body, but likes to appear more masculine and uses male pronouns for himself. His coworkers don't understand at all. This is merely anecdotal, obviously. My other friend lives at an LGBTQ sharehouse, and her trans roommate has detailed how horrible it is to be trans here. These sort of things in Japan make me feel very doubtful that they're doing something progressive. Far more likely they're doing something else. Okama jokes being so prevalent on Japanese TV make me think it'll still be a while before we see progress in this regard.
Leo is my favorite character to play as in Tekken 6 and 7. I hope this gets explained by Harada unless you all are right, then it could be that the idea is it's none of our business to know what Leo's physical sex is and only what he presents.