Why Tokyo Rents Are Rising: The Shift to Fixed-Term Leases (Teiki Shakka)

Why More Tokyo Landlords Are Switching to Fixed-Term Leases

For decades, Japan was known for stable rents.

Many landlords were happy to keep good tenants for years, sometimes even decades, without significantly increasing the rent. Inflation was virtually non-existent, interest rates remained near zero, and property values in many parts of the country moved very little.

But Tokyo today is not the same Tokyo it was five or ten years ago.

Property prices have risen sharply, construction costs are increasing, inflation has returned, and more international buyers and investors are entering the market. The average price of a 70-square-meter resale apartment in Tokyo's 23 wards recently approached ¥130 million, up nearly 30% compared to a year earlier. The market has now seen more than two years of consecutive price increases.

As a result, many landlords are beginning to rethink how they rent out their properties.

The Rise of the Fixed-Term Lease

One trend we are seeing more frequently is the use of fixed-term leases (定期借家契約 / Teiki Shakka).

Unlike a standard Japanese rental contract, which generally renews automatically and offers strong tenant protections, a fixed-term lease expires on a specific date.

At that point, the landlord can:

• Renew the contract
• Adjust the rent
• Change the terms
• Or choose not to renew at all

For landlords, this provides much greater flexibility.

For tenants, it means the rent is more likely to reflect current market conditions when the contract ends.

Why Are Landlords Doing This?

Many landlords signed leases years ago when rents were significantly lower.

Since then:

• Property prices have increased
• Inflation has returned
• Insurance costs have risen
• Maintenance costs have increased
• Construction and renovation costs have surged

In some cases, owners are finding that their current rental income no longer reflects the value of the property or the cost of operating it.

Raising rent under an existing standard lease can be difficult in Japan.

Using fixed-term leases for new tenants is often a simpler way to periodically adjust rents to current market levels.

Understanding Japanese Lease Renewals

Another aspect of Japanese renting that often surprises foreigners is the renewal process.

Many residential leases in Japan are signed for a period of two years. At the end of the contract, tenants are often required to pay a renewal fee (更新料 / Kōshinryō) to continue living in the property. While not universal, a renewal fee equivalent to one month's rent is common in Tokyo.

In exchange, tenants can typically continue occupying the property without having to move, sign a completely new lease, or renegotiate terms.

This system has historically encouraged long-term occupancy, which is one reason many tenants remain in the same apartment for many years.

The Hidden Cost of Moving in Japan

Higher rents don't just affect monthly housing costs.

In Japan, moving itself can be surprisingly expensive.

Many tenants are required to pay:

• Shikikin (敷金) — a refundable security deposit
• Reikin (礼金) — "key money," a non-refundable payment made to the landlord
• Agency fees
• Guarantor company fees
• Moving expenses

Depending on the property, the total upfront cost can easily reach four to six months' rent before a tenant has even moved in.

As rents increase, these costs increase as well.

A tenant moving from a ¥200,000 apartment to a ¥300,000 apartment may not only face an additional ¥100,000 per month in rent but also hundreds of thousands of yen in additional deposits, fees, and moving costs.

What Happens to Your Deposit?

Many foreigners assume they will lose their entire security deposit when moving out.

In reality, Japanese rules are often more tenant-friendly than expected.

When a tenant moves out, landlords commonly refresh the apartment before the next tenant arrives. This may include replacing wallpaper, performing repairs, repainting surfaces, and conducting professional cleaning.

However, tenants are generally not responsible for ordinary wear and tear resulting from normal use.

In fact, the longer you stay in a property, the more favorable the rules often become.

Items such as wallpaper, flooring, and fixtures depreciate over time. If a tenant has lived in a property for many years, the landlord may have a more difficult time claiming that older materials should be replaced at the tenant's expense.

As a result, long-term tenants often receive a larger portion of their security deposit back compared to someone who moves out after only a short stay.

Why Many Tenants Stay Put

This creates an interesting situation in Tokyo's rental market.

Many tenants are currently living under older contracts with below-market rents. Even if they could find a better apartment elsewhere, the cost of moving can be substantial.

Between key money, security deposits, agency fees, guarantor fees, moving expenses, and renewal considerations, relocating can cost hundreds of thousands—or even millions—of yen.

As a result, many tenants choose to stay where they are, while landlords increasingly seek ways to bring rental income closer to current market levels.

Fixed-term leases are one of the tools helping owners achieve that.

What This Means for Renters and Buyers

We don't believe Tokyo is suddenly becoming unaffordable.

Compared to many global cities, rents remain relatively reasonable, and Japan still offers exceptional value in terms of safety, infrastructure, and quality of life.

However, the era of completely stagnant rents may be coming to an end.

For renters, understanding lease structures has become more important than ever.

For buyers and investors, it's a reminder that rental income, property values, and market expectations are slowly evolving alongside a changing Tokyo.

The Tokyo housing market has always been unique.

But after decades of stability, it may finally be entering a new chapter.