Something funky is going on. At a certain point I can’t delete and the editor jams up. In the second try, Line2 gets the muted text color at first but end up disappearing.
Obsidian 1.4.4 (98) with Japanese (romaji) input.
But, if you enter the characters or character sets (kana/kanji in this case) one at a time and choose the suggestion, as you would normally type, the line wraps fine and delete works as expected.