Shinkansen (bullet train) commuting is a marginal phenomenon, with a few thousands doing it in a metropolis of 20M+. Highly reliable commuter railways with cheap express services are the backbone (and genesis) of Tokyo's sprawl.

> Thus you lose the benefit of being in the city (close to work, close to friends, close to cultural offerings, close to shops, close to ...)

This is the “Brooklyn is boring” problem. It’s temporary. The old city centre (Manhattan) is unlikely to decline rapidly in relative importance but cultural and economic life will happily extend itself from central areas to less central ones given the population and the money to make it worthwhile. Good transport links help enormously too.

Yes, though there is still room in the Tokyo metro area for even more growth, both vertically and horizontally. Even though Japan's population is declining, Tokyo Prefecture and its neighboring prefectures were still growing pre-pandemic (although I remember reading that since the COVID-19 pandemic struck there's a growing interest in living in more rural parts of Japan.) Regarding horizontal growth, there is still plenty of agricultural land in the Chiba and Ibaraki prefectures east of Tokyo that can be developed. In fact, when I take the Narita Express from the Narita International Airport to Tokyo, I pass by plenty of agricultural areas before reaching the easternmost fringes of the Tokyo metro area's urban sprawl. Another area where urban sprawl could occur is the Izu Peninsula in Shizuoka Prefecture just south of Mt. Fuji, where the beach resort town of Atami is located.

Regarding horizontal growth, there are plenty of places in the Tokyo metro area being redeveloped horizontally, such as the Musashi-Kosugi area of Kawasaki, which is just a 20 minute train ride on regular commuter trains like the Tokyu Toyoko Line and the JR Shonan-Shinjuku Line to Shibuya, a major hub in Tokyo. Over the past 15 years there has been a lot of development of high-rise residences in the area. Futako-tamagawa is another area of Tokyo that has seen much horizontal growth, starting with the Rise shopping center and nearby high-rise residences that opened around 2011. Rakuten moved its headquarters from Shinagawa to Futako-tamagawa sometime in the late 2010s, which has further boosted the desirability of Futako-tamagawa and neighboring areas such as Mizonokuchi just across the river in Kawasaki.

Disclaimer: I live near Silicon Valley but I travel to Japan roughly once every other year.