There are reports that he had a row with goalkeeping coach Pat Bonner.
Midfielder Keane was said to be angry that the Republic's three goalkeepers, Shay Given, Dean Kiely and Alan Kelly, didn't take part in five-a-side practice matches.
Keane was apparently all set to leave Japan after the row, and Celtic midfielder Colin Healy was put on stand-by.
'Change of heart'
"Roy Keane has had a change of heart and I am delighted," he said.
"He should be playing in the World Cup because he is one of the best players in the world."
McCarthy also denied the upset was over a row with Bonner, but said it as about "personal reasons".