Like many nations, Japan did make an effort in the interwar period to adopt a self-loading service rifle. Trials in the '30s culminated in four rifles being evaluated by the army. Unfortunately, I can't seem to find any information as to why specifically the Japanese dropped this program, although a lot of the general factors that caused other nations to drop their rearmament to self-loading rifles likely held true.
By the mid- to late-1930s, most major powers saw things were heating up and war was on the horizon, and while many tried to rearm with a semiauto rifle, all but the US ran into issues with manufacturing fast enough to rearm their forces before war broke out. The US had the benefit of both having a fairly small army up until war broke out and a massive manufacturing base to let them rearm quickly, and even they had forces still armed with Model 1903s when war broke out in 1941. Japan's situation was nearly the opposite of America's. Regular border clashes from the early '30s escalated into a full-blown war in China by 1937, and the escalation of that war saw Japan's armed forces balloon in size. Meanwhile, Japan had very poor industrial capacity compared to most of the West by pretty much any metric, so just keeping up with the expansion of the war in China was difficult.
Adding to Japan's problems was also the fact that the outbreak of war in China very much seemed to teach Japan all the wrong lessons when it came to land warfare. Their air supremacy saw them become complacent with WW1-styled light bomber tactics and observation balloons for artillery. They determined their 6.5mm service cartridge to be underpowered and developed 7.7mm cartridge complete with a new rifle and machinegun to address it. The new rifle, the Type 99, included peculiar features like the infamous anti-aircraft sights, themselves an artifact of Japan's inexperience with dealing with modern combat aircraft. All this meant that when Japan became embroiled in China and it found its resources strained, semi-automatic service rifles weren't found to be a high priority compared to things like switching to a new caliber and thus they fell by the wayside. Even if Japan had tried to make the switch, it likely wouldn't have been very successful, as Japan never even managed to fully replace its Type 38s with the newer Type 99.
That's not to say Japan remained completely ignorant to the capabilities gap. Once they went to war with the US, more serious efforts to develop self-loading weapons eventually popped up - the Type 100 Submachinegun and Type 4 Rifle come to mind - but they were too little too late by that point.