Applying For Spouse Visa but Living Apart

A bit of a tricky situation here, would appreciate some advice.

Me and my other half have been dating for 3 years.
im over here for a year on a working holiday visa right now.
We recently got married and applied for a spouse visa.
They called my wife and asked to confirm why we have different residential addresses - She told them we are saving for a house and they said without the same address there is no chance of getting a visa.

Heres the thing
My wife lives with her mum, dad and her child.
I stay 10 minutes away. Same area. But tiny 1 room apartment

We didnt move to a new apartment last year because
a) i was only on a working holiday visa and B) she has a young child, we want to save up enough YEN for a nice place near her parents

The plan was to move over to a spouse visa then we both spend 2017 saving cash.

Any thoughts or advice on what to do in this situation?

Well, immigration already told you that's not possible, so what more do you want? That we call them and be like "Hey so spinechin asked on japan-guide about his spouse visa problem so could you please be darlings and make an exception to your usual policies to grant it to him anyway?"

What you should do is get your own visa.

Why don't you move to her house on paper and get your juminhyo with same address or she can move to yours
I don't think immigration checks where you actually sleep at night

"Spouse of Japanese national" resident status is granted so that you can "live together" in Japan with the Japanese spouse.

If I were you, I would move my address over to your wife's. You might keep the small single-room apartment for your work, for your convenience, for your current extra luggage/furniture, or whatever, but on the record, you need to be at the same address. Also, they would wonder why you live apart (why not live at your wife's house) if your intention is to try to save money, as living with the spouse AND the parents is the most common way to save rent.