Thank you for sharing this story.  I am going to suggest a few changes as a few of the sentences could flow better.

The Obon Holiday in Japan

It is a shinto and Buddhism mixed based custom widely practiced among the Japanese nationwide.

It is said that ancestors' spirits come visit their living descendants living today during the holiday.

What Japanese normally do for the holiday is to clean their family graves, to make a set of miniature horse and caw with a cucumber and an eggplant respectively, and to decorate their Butsudan with some flowers which is a household Buddhist shrine.

It is said that ancestors come by riding a horse because they want to see their relatives as quickly as possible.  and They return to their world by riding a caw because they do not want to go back to where they belong with their descendants behind. (Not sure what you mean here - they do not want to return to where they belong without their descendants)

If there is a local festival around the Obon holiday, a/the bon dance is performed by locals and visitors of the festival.

There are some other traditions related to the Obon festival that are only found in some local areas, but these are some examples of what Japanese do in the Obon holiday.