This article sounds somewhat socialist and left leaning and assumes that such a "Japanese system" is what most families actually want.
If you have a house in a typical middle class neighborhood, practically speaking you don't want neighborhood to densify too much. With higher density comes a lot more people living in the same street as you, and with that comes noise, more traffic and less personal space which can have negative psychological impacts on some people.
It also comes back to the arguments for an against planning and development of cities; just because there is an open area available, should we really develop everything? I realize that we live in a world with a booming population, but it doesn't mean that we should aim to fill every square meter on this planet with people.
Edited open space->personal space. Sorry guys.