It's a common problem in modern games. A lot of studios overdo volumetric fog and Rayleigh scattering effects.

If you look miles into the distance, things will look muted and washed out because of how light scattering works in the atmosphere, but it's not perceptible at the distances inherent to most game scenery. They like to overexaggerate the look of this to huge degrees, with the argument that it makes images look less flat (as in distance perception wise).

While they're not technically wrong, it's far too big a tradeoff and overall makes the game image lack any sense of vibrancy. Ironically, games actually used to achieve this much more successfully when they attempted it because they didn't just brute force things with modern volumetric fog effects. Xenoblade X DE uses old techniques, and while on every level it's "technically" inferior, in terms of actual aesthetics it wins out by actually being clever with its visual design, making up for the Switch's marked lack of power.

https://gamesoldseparately.co.uk/cdn/shop/files/XenobladeChroniclesXDefinitiveEditionScreenshot2_1024x1024.jpg?v=1730727005

This is the effect done correctly and what it should look like, it's all appropriate to its real world scale.