I think there are a couple of things to consider. Number one is that Android at the very beginning never was designed for large touchscreen phones, rather it was supposed to be a small portable Software Stack that would run on digital cameras where Java would be good enough.

Another historic thing that must have played into this is that Android was fighting an uphill battle. At the time iOS, PalmOS, BlackberryOS, Symbian and Windows Mobile all were shipping units. So I think they knew they had to keep the barrier of entry for creating Apps as low as possible and Java was (and still is) an incredible easy to understand language with a very gentle learning curve. Plus it was one of the most widley used language with robust tooling.

Also for implementation - Android actually was AOT compiling Apps during installation during the Android 5 and 6 days however starting with 7 they went away from that by using a hybrid approach. Basically if you download an App and launch it the first time, it would run in JIT mode and collect data and than compile and optimize cirtical parts while the phone is idle and charging. There even is an adb command (adb shell cmd package compile -m speed -f my-package) to manually compile apps. But I have played around with this a lot, trust me, and I can't notice a difference.

Also more generally I think that Android Apps being mostly made up of intermediate bytecode instead of raw CPU instructions is overall a massive benefit for security and incredible futureproofing. It allows for things like x64 Chromebooks and Asus Zenfones with Intel Atom SoCs (yes that was a thing) and would make a transition to a new ISA like RiscV somewhat managable I think. Also I don't think Java and its performance overhead matters - usually its badly coded Apps or these god awful wrapped webview "apps" that cause issues. Simple as that. If you today compare a Nexus 5 and an iPhone 5S, the Nexus 5 is faster 8/10 times, and that despite having a slower CPU and the whole java stack.