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To be fair, there is very decent public transportation in Japan so it wouldn't be terrible.
All the jobs are in Tokyo, so people live in Tokyo or the surrounding prefectures. Now they’re paying people to leave Tokyo and the surrounding prefectures. Where will these people work, then? Japanese companies dislike WFH for, among other reasons, the same archaic reason they all set up shop in Tokyo instead of in other cities: overemphasizing relationships rather than getting the job done.
Try forcing companies out of Tokyo first. Then you might see the population density ease up, up populations of other cities balance out.