Naturally, the ass-eye pictured here isn't something George Kamitani saw in a flash of inspiration - it, like everything else in Muramasa: The Demon Blade and its upcoming DLC, is informed by Japanese folktalkes. Specifically, the tale of the shirime (eyeball ass).
"The legend goes that late at night, a samurai walking down the street when a man in a kimono stepped in to block his path and said “Excuse me … just a moment of your time … “ The samurai readied himself for an attack, and shouted back “What do you want?”God I love you, Vanillaware.
The man suddenly shed his kimono and stood stark naked. He then bent over and showed his ass to the samurai, which had a single, huge eye. When the eye opened, it shown with a bright light. The samurai screamed with fright and fled from the mysterious monster.
The poet and artist Buzon included the shirime in his collection “Buzon’s Yokai Picture Scroll” (蕪村妖怪絵巻), which is the only known source of the story. It is a variation of the nopperabo legend, and the shirime is considered to be a type of nopperabo."