Japan has a rugged terrain, how have the people adapted to this?

Basically Rabbit is correct. But for the people who have decided to rough it in the mountains, they have learned the art of terrace farming for their rice paddy's. Japanese are masters at utilizing space, so you would be amazed at what they can do in a very narrow strip of land. You will see one or two Mikan (mini oranges) planted here and there, etc. Amazing. But very few people decide to live in the mountains.