Eh, I don't think MS shelled out for this otherwise it would be a physical version as well. A lot of these Japanese games are just Gamepass only. They don't have the confidence to fully commit. Like some Digital/cloud-only versions of some games on Switch. Look at Yakuza. The only one to get a physical edition is the one MS paid for some exclusivity. The rest are Gamepass only. PS4 remains the only place where all those games are physical.
GamePass deals are definitely not free though and it is a known fact. In order to even put the game on GamePass, Microsoft has to pay a certain sum to the publisher. And here we are talking about the game available there from day one. I do kinda agree though that this deal is cheap as hell, because Octopath is a 3-year old game and it's not like it will sell a lot on Xbox anyway. And I fully expect Playstation version to be announced as well given that this game released even on dead Stadia already.