On the first part, I've seen (and bought) various cars like twin turbo Aristos that have been driven by pensioners. They usually go for the most expensive model, regardless or not of whether it's the sports version. Japan is also a mass of freeways that run right into the centre of every city. There are traffic jams, sure, but more often than not on the freeways, people are cruising along at 100km/h+, same as we would be on the open road.
On a global scale, Japan IS small. Just because it's 1400km long doesn't mean people are driving long distances. I lived in Osaka and asked a class of 30 adult English students how many of them had been to Tokyo - one hand went up! When Japanese people travel, they go overseas. When they travel locally, they use the bullet trains - they're faster and cheaper than using a car on the freeways (which have exorbitant tolls).
See above.