Was that the entirety of the apartment in photos, minus the bathroom? Even by New York standards, that's pretty tiny.
E.g. see photos here: https://apartments.gaijinpot.com/en/rent/view/216237 (about $1,100 USD/mo)
I’ve stayed in both ‘international’ hotels that cater to foreigners and in business hotels which explicitly discourage foreigners by having literally everything in Japanese and they’ve all had fairly standard sized rooms for a hotel.
And from the other part that mentions "business hotels" and especially ones that "explicitly discourage foreigners". Except if those are the rare kind of business hotels for poor destitute businessmen.
An actual example from two of the categories I've actually stayed in.
ANA Crowne Plaza Okayama - $116AU a night. Not shockingly cheap, but cheap nonetheless.
PRINCE something something, in Osaka. 6000JPY a night on a public holiday.
No matter your definition of cheap, they're not 'expensive' hotels.
The business hotel's room was tiny (as described by the person your replied to). The ryokan's rooms were a very nice size. The hostel's were tiny (either 4.5 or 6 tatami?), but the bathrooms were down the hall, at least. The hotel in Hakone had decently-sized rooms, but not as large as the ryokan. I don't remember them being any more cramped than when I've visited cities in Europe, anyhow.
How fancy, must be a Western-style room. In a Japanese-style room you get nothing but a mattress.