Your illustration style for everything background is great so i was expecting a lot more from the characters. I do not know what are you refering to from the point of japanese legends but the weird pot thing just looked really out of place.
In terms of your choice of music. The track has been used in the animated film "Paprika". Now there's nothing wrong with using something borrowed but upon hearing this song i am instantly reminded of the wonderful animation from the aforementioned film and what i see on the screen is not that. As i already said your art is great but you lack fluidity in your animation. The music track is cheery and lively so it should have some dynamic animation/movements/camera angles and so on to go along with it to utilise its full potential.
It is fantastic for a first flash so 9/10 from me. As you get more proficient in flash try to liven up your illustrations even further.