If you're a government and you want people to do things you want them to do, then just make the alternative horrifically expensive and slap a reason on it. "Driving a car is a privilege and a luxury. Don't want to pay luxury prices? You have public transportation and your legs."
Japan is small and has its cities designed around walking and public infrastructure. Not like most Euroid countries and America where there's miles of flat empty farmland and slapping roads everywhere is cheap and passenger trains have heavy drawbacks. Japan is also an island nation, moving domestic freight by ports is a valid option whereas landlocked countries need to put the burden far more on rails and highways.
It's all well and good for the cities but I wonder how these policies affect remote areas and towns away from pop centers.
A private car is a luxury item where I live as well. In addition to the high VAT, a new car (or an imported used car) carries a separate car tax, which can be exceedingly high for a powerful luxury car. Over half of gasoline's price is taxes.
Japan isn't especially small, compared to European countries. It a lot larger than Italy, for example. About 70% of Japan is forests, so it's not, by far, so jam-packed you couldn't build roads and highways. It has plenty of those. Europe is covered by passenger train networks. Europe is where those things were invented, you know. Europe is also full of towns founded long before automobiles were invented (just like Japan), so the city planning may be poorly suited for them. I'm not sure where you live, but somehow you seem to think Europe and the USA are similar.