Very good points, Minty.
But when they're trying to prop up the tax base, principles sort of fall by the wayside. The population of Sado has dropped from about 125,000 to about 7,000 in roughly the last 50 years.
The article didn't make it clear how they thought relaxing the immigration law would bring new blood and new investment into Sado specifically. It looked sort of like the locals are grasping at straws. Perhaps they hope to have the law revised to ease permanent residency on Sado, but not in other parts of Japan. This must be it. Otherwise the people taking advantage of the (proposed) relaxed immigration standards would do the same thing generations of Sado Island youth have done and vote with their feet.
If people who are from there leave in droves, what is there to attract people from anywhere else? Personally, I'd figure those 120,000 must know something I don't.