On December 5th, the Nikkei Shimbun reported that residential rents in Japan, long considered resistant to increases, are rising sharply, particularly in Tokyo.
November data from the Consumer Price Index (CPI) revealed a 0.9% year-on-year increase in “private rent” in Tokyo’s 23 wards, the highest in nearly 30 years.
Experts suggest this trend could continue, driven by the Bank of Japan’s interest rate hikes and broader economic changes.
Demand Drives Rent Growth in Key Areas
"In areas with strong demand, landlords are aggressively raising rents during tenant turnover or lease renewals," said a representative from real estate research firm Tokyo Kantei. The firm reported that October's average asking rent for condominiums in Tokyo’s 23 wards was ¥4,264 per square meter, a 15% increase compared to five years ago.
Maintenance Costs Add to Rising Expenses
Higher maintenance and repair costs are contributing to the upward pressure on rents. According to CPI data, the cost of "equipment repair and maintenance" in Tokyo rose by 2.3% in November.
This increase was fueled by a spike in fire insurance premiums and rising raw material costs in October.
National Trends Mirror Tokyo’s Growth
Rents are climbing across Japan. October data showed a 0.3% national year-on-year rise in the CPI for rents. Certain cities, including Nagoya, Otsu, Miyazaki, and Takamatsu, saw steeper increases of 1.1%, outpacing Tokyo's 0.6% rise. Analysts attribute this to population growth in these areas and the introduction of new rental properties.
Interest Rate Hikes Shift Landlord Strategies
The BOJ’s monetary policy is reshaping the rental market. Following its first interest rate hike in 17 years in March of this year, and then a subsequent increase to 0.25% in July, major banks raised fixed mortgage rates in November.
Floating rates are also trending upward. Landlords facing higher mortgage costs are increasingly passing the burden onto tenants through rent hikes.
Deflation's Hold Weakens
Historically, rents were a symbol of Japan’s deflationary stagnation.
Since 2000, Tokyo’s private rents rarely exceeded year-on-year comparisons. However, the trend shifted in 2024, as rising wages and higher material costs bolstered prices.
Shinichiro Kobayashi, an economist at Mitsubishi UFJ Research and Consulting, observed, "The noticeable rent increases mark a clear stage in Japan’s journey away from deflation."
Broader Implications
As rents climb, they are exerting a growing influence on service costs, which account for nearly 10% of Tokyo’s CPI.
The Bank of Japan views this trend as crucial to creating a cycle of rising wages and prices, signaling potential long-term shifts in Japan’s economy.
Source:
Nikkei Shimbun (Japanese only; paywalled)
