The reason for this is that Japan uses a mixture of symbols that represent entire syllables (hiragana, katakana) and symbols that represent entire concepts (kanji). So they have a much higher density of information per symbol, at the expense of having a lot more symbols.

Then, when the game gets localized, input fields for names and spacing for text displays are way too short for languages written in the latin alphabet.

I assume it's a similar cause here.