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Here's a modern font that really stretches the limits of packing hanzi into a tiny number of pixels: https://3type.cn/fonts/dinkie_bitmap/index.html

This is how 9pt bitmap commercial fonts simplifies complex kanji. https://note.com/zoji_numa/n/n088f4edd773d

Surrounding text context must help quite a lot?

Aftr a11, yu are proba81y ble 2 raed htis sntecne, but a cpmuter wd strgggle.

Not an expert, but I would say that the reason is that Kanji is a silhouette-complex form, typical of pictogram written languages. The Western alphabet-form is certainly smaller in variance (which helps) but also simpler in its silhouette.