To be fair Yasen M is 130m long, and that's for a still fully fledged SSN with a proper torpedo complement.
A more SSGN oriented submarine that cuts back on torpedo load somewhat could definitely be viable in a 120m length.
Yes, 120m might be viable. But if you already have a general purpose Type-095 SSN and you're going with an entirely new design which cuts back on torpedo load to become more like an SSGN, then why limit it to 120m?
Assuming it has 4 Payload Modules, they might as well go for an extra 10-20m, to 130-140m and double the VLS count.
If we use the Virginia Payload Module as an example, they would go from 28 to 56 Tomahawks.
If it's a tripack missile, it would go from 12 to 24.
They are useful increases in missile counts for a single engagement.
The displacement would increase <30%, and the overall cost would likely be less than this as well.
But they get double the missile count for this additional spend, with marginal decreases in top speed.
---
It looks like they are prioritising pure underwater performance in terms of quietness and maximum speed.
That is a nice-to-have for an SSGN, but really useful for an SSN which is designed to hunt opposing submarines which also have noise levels below ocean background level.
And if you have already have a base SSN design, you can always lengthen it later to accommodate more VLS.