With the Japanese emphasis on close combat and closing with the enemy, it seems like sub-machine guns would have perfectly fit their style of fighting and have been extremely beneficial. Yet, alone among the major belligerents, they seem to have made very little use of them.
[I know they actually had a few different sub-machine guns, but my quick wiki research suggests that the most widely used produced Japanese sub-machine gun was the Type 100/40 and that Japan produced only about 24-27,000 of these. Compare that to the other major belligerents of WW2--over 1 million German MP 40s, about 6 million Soviet PPSh-41s, 3.7-4.6 million British Stens, and about 2 million American Thompsons.]
In regards to the Type 100/40, it was a fairly complex design and therefore difficult to make. So they simplified the design to get the Type 100/44 and found that they still didn't have the manufacturing capability to make them in any serious quantity. It also didn't much help that the Japanese didn't start trying to seriously produce the weapon until 1943, by which time US submarines were already cutting off the supply of raw materials and Japanese quality of manufacture was deteriorating seriously.
Basically, they initially didn't realise the need for submachine guns and once the requirement was realised, it was too late to make them.