"that's sad" usually means literally, "that's sad".

How the other person interpreted it ("that's dumb") is more of a slang usage.

It's like, "It's sad that you would be the kind of person who'd do that". It's heard as a personal judgment, and not a judgment about the world or the situation.

One of those...backhanded statements that passive-aggressive people would use to make it sound like they're judging a situation when they're actually judging a person.

I don't think you did anything wrong. If you want to avoid that misunderstanding in the future, you could clarify what about it is sad.

"It's sad that raising children is seen as prohibitively expensive where you live". Tons of words, I know. That's why I'm not blaming you for what you said, lol

But your english is good! I couldnt tell that you didnt speak the language, learning a language just doesnt help people understand cultural nuances. Im trying to learn Japanese and I know im going to get minute details wrong

Ok so as an American you know that our language changes dramatically every 10 years or even region to region, right? You may not have interpreted what he said the same way that I interpreted it