1) Japan's playerbase is huge. Very very very huge. A lot of those 11 million copies were bought by JP people.
2) Western comp has always been small. It's a fraction of a fraction.
It's a pretty niche community at the end of the day, but tbh I think there's some merit in that. It makes it easier for your voice to be heard and it also allows the potential to get more people into the the scene.
Honestly this is why I love the Splatoon community. It's big enough by just the fact it's a Nintendo game that there's plenty of fanart and content about it being made, while it's still small enough that someone like myself, who's deeply socially anxious and has trouble actually
being in communities on a deeper level than "likes posts" can still exist. Squidboards specifically averaging about 11-12 members online at any given time I'm also online is ideal for me, there's enough people I don't feel like I'm intruding on a preexisting friend group, but it's small enough that I don't feel overwhelmed
In terms of the actual game and how many people are online, I don't think there's a significant drop in the playerbase being honest. While online multiplayer games are inherently going to decay over time, given that Splatoon is both a big series, as well as updates and content still being added means that I don't think the decay is really going to be
too noticeable right now, it might just be coincidence you run into people you recognize (I've certainly run into the same people over large spans of time, three times now I've gotten put in matches with a friend of mine without even knowing they were online, the earliest being only a few months after release, and the most recent being only last month)