The movie Big Hero 6 takes place in and around a city called San Fransokyo, which is obviously an amalgam of San Francisco and Tokyo.
Is there a explanation why this city exists, both in and out of canon?
In canon, is this our world where somehow Tokyo and San Francisco combined? If so, why and how did this happen, and where is the result located?
Out of canon, was there a reason to exotify San Francisco or westernise Tokyo, instead of picking either city?
The creators of the film are pretty clear that San Fransokyo is based in America, on the site of San Francisco (hence the distinctive landscape, bay and hills). The intention was to pay homage to the fact that the original comic is set in Japan while updating the film for a largely US-based audience. To do so they created a fun "mash-up city"
As to why the city has such an extensive Eastern influence in-universe, it's because of the city's extremely high Japanese population.
Don wanted to figure out a logical explanation for how a mash-up city like this could exist. I came up with the idea that, after the 1906 earthquake in San Francisco, Japanese immigrants rebuilt the place using techniques that allow movement and flexibility in a seismic event.”
Scott Watanabe, Big Hero 6 art director, environments
We can confirm the location from the concept art from the "Art of Big Hero 6" artbook
and this panel from the deluxe Junior novelisation
