for a japanese bath design all you need is a nice tiled floor, a hinoki wood tub, and some hot water

The knotty and smooth wood have almost the same performance. Should they were to be tested in a laboratory, you will find out that the straight cut hinoki is maybe 10% more resistant than the knotty one. But this is rather an academic problem. You will avoid anyway putting the hinoki in extreme conditions and will enjoy it for 20 or 30 years.

It should add that the knotty hinoki is slightly (again, about 10%) more aromatic than the straight one as knots tend to be rich in resin.