Two important things were happening in Iberia at the beginning of the 16th century:

• The folks there were sending out ships to the rest of the world to explore/conquer/colonize.

• The concept of "Spain" as we know it was beginning to solidify. A quick history: During the medieval period, numerous kingdoms controlled Iberia. Going into the 15th century, the two most powerful were Aragon and Castile (so called for its many castles, as also seen on its coat of arms). In 1469, Isabella I of Castile and Ferdinand II of Aragon were married, bringing control of both kingdoms into the same family. Their grandson, Charles I, would hold both crowns, effectively creating what we would now call Spain.

However, Aragon and Castile remained functionally separate polities for many years. Many people did identify as Spainiards (Spanish España from Lain Hispania), but in the early decades of the 16th century, when the Phillipines were first colonized, a good number of people considered themselves to be firstly Castillean. Some important colonial documents, like Guaman Poma's account of the Inca and Spanish governments use both Espana and Castilla. Colonization occurred when "Spain" was coming into fashion and "Castile" was just starting to lose its distinction.

You can see the results of this elsewhere in the world too. In much of South America, people will say the speak Castellano instead of Español.