Of course its possible, afaik Piefed uses Libretranslate for this. So the same would work for Lemmy, someone just needs to find the time to implement it.

Translation costs either money or user data. Probably a political issue.

Personally, I still can't understand why Lemmy needs to deal with post and comment languages anyway. It's a reasonable feature for microblogging. But when you start sorting content into groups (aka boards, communities, etc.), you don't really need to mix different languages to discuss one specific topic.

Netnews and Bulletin Board Systems had language- and location-specific communities. Everyone participating in one of these communities/groups/boards was writing in the same language.