i am a japanese person here to confirm that yes she is trans if you watch the episode and know everything being said there is literally no question that she is trans. the fact that she is trans is also relevant to the plot/her death. any “trans jokes” made in the episode only further emphasized how “Masao” was not a fitting name for her at all, and how she truly is Lily, always will be, and tbh, always has been. there’s no “liberty with the subtitles” japan has an LGBTQ community and I won’t stand for these ignorant westerners erasing that.