It IS based on a yokai thing, only that particular yokai never had any specific connection to young boys.
The idea behind the kappa was that they rip the souls of their prey out of their buttholes, and they can only be temporarily tamed by feeding them cucumbers.
Ikuhara just decided to take that already weird and disturbing concept and make it even MORE weird and disturbing.
Because stuff like that is just how Ikuhara rolls when it comes to making anime. I mean, just check out his previous anime Lesbian Bear Storm.