If the government has such strict criteria for testing, might it also not have implemented strict 'stages' that you must proceed through after a diagnosis? And a further, stricter criteria before even allowing hospitalisation?

My other suspicion is severe cases will try their best to hold off on self-reporting given the strict government testing criteria and lack of awareness/panic.

This is one key way that Japanese and US society diverge - Americans are much less afraid to 'make a fool of themselves' if they believe they are correct/in danger. Japanese unfortunately, much more so and especially when given direct government directions.