Sort of, the File-system API doesn't encrypt the data being stored locally. It does however change the file naming conventions up. So you may have named it log.txt
but if you poke around where the file-system API stores files, you'd probably find it under some arbitrary randomly generated file name like "00010" or in a random directory like "24/00123".
Anyway, you can open each file up in a text editor - if your file had text written to it you would be able to view it as such. Or if you wrote JSON to the file-system API it would be in human-readable string format when you opened in the text editor.
On Windows 7, with Chrome it's found here:
C:\Users\{user}\AppData\Local\Google\Chrome\User Data\Default\File System\
If you want to find out where it is stored via Chrome on other OS please see this post