TL;DR: It seems localization does not work with xCode 6.1 and 8.1 simulator. Workaround: Go to "edit schemes" >> "Run" (side bar) >> "Options" tab >> "Application Language" Select the language you wish to run the app on the simulator.
Long Story:
I've updated xCode to 6.1. The update deleted the iOS 7.x simulators and left me only with 8.x simulator. I've done the following steps:
I've installed the 7.x simulator
Cleaned the project
Deleted the app from the simulators
Deleted the derived folder for my project
The project supports English and Japanese. on 7.1 simulator (5s) the localization works as expected. on 8.1 simulator (5s) it does not work.
I'm guessing Apple broke something with the simulator, because it works on real devices.
Any input on this one, anyone else experienced similar problems?
EDIT
It seems like a bug in the simulator, reference:
Apple Dev Forums
This is mentioned in the Xcode 6.1 Release Notes and in other stack overthrow threads, like:
iOS8.1 Simulator always uses US keyboard layout despite german hardware keyboard
Success story sharing