Editors should probably not be taking a translation and turning it into a less literal one. They should mainly be there to ensure consistent terminology (especially with proper nouns or earlier entries in the series if you are respecting those), maybe acting as typesetter (though this may well be the job of another when it comes to game translation as seen on sites like this), checking grammar, checking spelling and doing all that. If your editor is changing vast tracts of text, say to turn it into a less literal one, then chances are your translators have failed in their task, possible minor exception if the editor has to trim the text to help it fit within the game but there they should be working closely with the translator/translator's notes. They might change a few things to help things flow better but even that should be done sparingly by the editor.
Generally at the start of things you will probably have a discussion on how the game should be translated, what, if any, points of reference there are (older games, other works that feed into it, other aspects of culture that might have been borrowed and used), what your target audience is (those with deep knowledge of Japanese culture, those with enough to get by, those that could not be expected to know a thing) and all that sort of stuff. The editor's job would then be to ensure consistency with that, possibly also checking some translation if they know Japanese but that would be a luxury in most fields, especially fan translations of various sorts.
