Why does Japan take a page out China play book and build artificially islands for future settlement?

In which case, they do. Tokyo bay has a lot of reclaimed land and artificial islands in it, amounting to a total of 250km square of reclaimed land. 

Noone is building artificial islands

China is taking little islands and  making them bigger

Japan has been doing the same thing for over 30 years

They expanded Okinawa in the 1980s

You should had done some research before you ask because had you had the initiative to do so you would had found out 2 important points:

1) Japan has several artificial islands long before China. Who did you think taught the Chinese how to build them when China has not invented anything original since the 18th century.

Just to name 3 examples of Japanese artificial island -

-Central Breakwater: located in Tokyo Bay; built in 1973.

-Chubu Centrair International Airport: located in Ise Bay; completed in 2005.

-Dejima: located bay of Nagasaki; already in use by 1634 as a trading post.

-Island City: in Hakata Bay; built 2005.

 and those are just some of the artificial island in Japan. There are at least 10 more.

2) Because of the low birthrate, Japan is facing a decline in their population and this trend started more than 20 years ago. Why would they need more places to settle when there are thousands of homes on the market because the owner passed away without any heirs.

Been there , done that .

They already have more than one .

It's not a new thing, land reclamation began in the Edo era. 

Japan has very little inhabitable land compared to its population, and can afford big projects

At the Japanese level, islands are automatically born and raised.

Did you mean to ask why doesn't Japan do that?

In which case, they do. Tokyo bay has a lot of reclaimed land and artificial islands in it, amounting to a total of 250km square of reclaimed land. 

The sea has protected Japan from invasion for a thousand years .....