I've talked about it a little in the past on this thread, yes they are popular. I won't write a giant research paper explaining why they are popular and citing a million sources, but every Japanese N64 fan i know (I'm part of a N64 dedicated forum and have lots of Japanese members and associates) says Banjo Kazooie are big there. People often say N64 isn't popular in Japan, which isn't true. Nowadays N64 is more popular in Japan than ever, nostalgia is high just like it is over here, and they love Banjo.
If you type バンジョーとカズーイ(Banjo-Kazooie) into google, the 2nd result is バンジョーとカズーイ スマブラ (Banjo Kazooie Smash Brothers). That alone should show how popular they are, being the 2nd in Google search result. If you go through every result you can see so many lists with Banjo and Kazooie. Phil Spencers tweets have been translated and Japanese fans rallyed for Banjo once they realised it's possible.
Of course remember this doesn't mean they are most popular. Japan has just as many crazy chatacter communities as we do. Many want a Dragon Quest rep, many want Monster Hunter, many want Crash Bandicoot, and there are dozens of super popular character camps. But Banjo & Kazooie are in the conversation very often all around the world and are obviously in Sakurai's sight given the amount of Rareware references already in Ultimate. So here's hoping, even if it takes DLC. I'm eagerly anticipating the next direct, desperately hoping to see a Minecraft stage or something to confirm Microsoft involvement. As soon as Microsoft is revealed to be involved, Banjo's chances instantly shoot through the roof.