I know that in Sydney, Australia, there's a perceived "space shortage" but the true issues are regulatory, nimbyism, and behind most of that is a desire to protect the investments of existing property owners. We could just build upwards and have an abundance of centrally located dwellings. Most buildings in Sydney are just a few storeys high.
Tokyo reminds me of Sydney, except for the earthquake factor. If the earthquake factor isn't an issue, then the situation is truly extraordinary; millions of people living in the tiniest of spaces just to protect existing investors.