Yes, it only seems to work with kepubs.
For a Japanese-English dictionary, you may also want to check out this thread:
https://www.mobileread.com/forums/sh...d.php?t=197828
I find the two dictionaries surprisingly good.
Personally, I don't find moving the toggles around to select text to lookup to be that much of an issue. Took a while to get used to at first, but now it works quite well for me, especially on my KA1. I find that the larger screen size enables the use of larger font which makes the highlighting process a bit easier.