I gave up trying to use the default Tolino reading engine (I also encountered some more bugs besides letter spacing) and installed KOReader. The current version of the Tolino Shine 5 firmware is not yet officially supported, but there's an experimental version to be found in
this Github issue discussion (the update package contains a few more patches from
this branch that are required for KOReader to work on the new "Kobo v5" firmware versions).
KOReader uses its own rendering engine, which works
much better for me than the default renderer.