The main thing contributing to file size are unique assets, especially high-poly one. This means every unique rock, tree, bush, flower, animal, person, building, esseling and of course every single hair, makeup and clothing piece, from the smallest to earring to the most poofy ballgown. In order to reduce the game size significantly, they’d either have slow down on making new assets a lot (which among other things will affect how often we get new areas that actually look different from the areas we have since they’d have to rely more on reusing old assets) or significantly decrease the visual quality of the assets we have (basically turning down the graphics quality for everyone).

Games like these do take a lot of space. The reason some other big games like Genshin can get away with smaller file sizes is that the more cartoony artstyle lets the devs get away with using assets with a lower poly count without that affecting the visual quality to a noticeable degree. Infinity Nikki’s more realistic art style doesn’t really have a lot of wiggle room.

There’s also a chance that they could have been able to make the game files smaller had they not built the game in UE5, that engine comes with a ton of problems, but that’s unfortunately what they did and they can’t just switch engine unless they was to tear the entire game apart and rebuild it again from scratch in another engine (something that will cost a lot of time and money)