My understanding is that if someone from Gothic Earth's Japan (or Faerun's Kozakura) were to be misted to Vallaki and met my Rokuma character, then they could understand each other and my character would never believe in a million years that that person was Japanese, and not Rokuma. I could see the two arguing over why the other calls the language something different; Rokuma vs Nihongo (Japanese). I think it is both a convenience, allowing us to use real world linguistic knowledge to flesh out vocabulary, and also adds to the surrealism of the Domain of Dread by having the seemingly impossible occur. By having two different languages develop separately but identical, its adds to the spookiness effect of the setting.
So a Romanian from Gothic Earth should speak and understand Balok, but he will insists the language is called Romānă, and be super confused as to why these Barovians call it Balok.