I've only seen that on an emulator. Happened quite frequently when testing a hack I made to the game, and it happened both with the translation patch and without. Never happened on my psp.
Only ever saw it on PPSSPP though I never thoroughly tested on any other emulator.
Stupid idea: Maybe it's one of those crazy methods of copy protection? The game thinks it's being run on an emulator and deliberately doesn't load the terrain. Earthbound did something similar, what with deliberately crashing right before the final boss and deleting all your saves.
Only ever saw it on PPSSPP though I never thoroughly tested on any other emulator.
Stupid idea: Maybe it's one of those crazy methods of copy protection? The game thinks it's being run on an emulator and deliberately doesn't load the terrain. Earthbound did something similar, what with deliberately crashing right before the final boss and deleting all your saves.