Yes, a rail tunnel seems more logical and Seikan would seem to prove that earthquakes are not a deal-breaker.

With another (much shorter) tunnel at Banyuwangi, Indonesia’s rail network could run from Palembang to Bali. Very logical in a such a densely populated place. The Japanese would have done it already! Maybe this would have been a better use of all that money being spent on building a new capital city in the jungle.