Well Japan was nice while it lasted
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Japan managed to last really long as a high trust society.
The reason why foreigners (from certain countries) are not to be trusted is because they come from low trust societies. They're low trust by design. Deceit is part of daily life there. They bring that with them to the new place and it's not just culture shock or culture clash, it's bad and illegal behavior.
You don't have to import the third world. If you do you will become the third world.
No, the reason foreigners from any country must generally be kept out, is because diversity of any kind destroys high trust societies and social capital. Japan would not be Japan if you had 20% even from a country that you think is a high-trust society - you'd have ethnic tension for example.
Being a small island nation has its perks.
Japan is not that small, it has the 11th largest population: 123 Million. Below Mexico and above the Philippines.
Yes, in land size it's small, 62nd. It's also really isolated, which should make it easier to keep invaders out.