Those who have seen "My Neighbour Totoro" will remember that the 2 girls (the older is about 12) bathe with their dad. As it's one of the most popular anime in Japan and doesn't seem to shock anyone, it's because Japanese find it perfectly normal. Not so long ago, public baths and onsen were all unisex. There are still some that do not separate men and women, but thery are getting rarer as Japan is Westernizing and Americanizing itself.

I don't think men have any dirty thoughts at all when they bathe with their daughters. Japanese men very often do not even consider their own wives as a normal woman with whom to have sex once she becomes a mother. On the other hand, it's more acceptable for Japanese men to look for other women after that justly because the new mother doesn't care about sex anymore. It's a fundamental cultural difference.