Since around 2025, a rental contract known as the fixed-term lease contract has been gradually spreading, particularly in urban areas of Japan.

Although this term was rarely heard in the past, recent data shows that more than 10% of rental properties in central Tokyo are now fixed-term leases. In Shibuya Ward, the figure has reached as high as 18.9%.

What Is a Fixed-Term Lease?

A fixed-term lease contract is a rental agreement in which the lease period is set in advance and automatically ends when the term expires, without renewal.
This system was introduced in 2000 through an amendment to Japan’s Land and Building Lease Act.

In most rental housing, the standard arrangement is a regular lease contract.
Under this type of contract, the lease is generally renewed if the tenant wishes to continue living in the property.

Fixed-term leases, on the other hand, have traditionally been used in situations such as:

  • When an owner is transferred to another region for three years and wants to rent out their Tokyo home only during that period
  • When an apartment is intended for a child returning from overseas study in a few years
  • When a building is scheduled for redevelopment after several years and can only be rented temporarily

Under a regular lease, landlords cannot terminate the contract solely for their own convenience if the tenant wishes to renew.
This created a problem: the owner could not use the property when they needed it.

With the introduction of the fixed-term lease system, renting out a home temporarily—particularly during job transfers—became a realistic option.

However, today, fixed-term leases are no longer limited to such cases.
They are now beginning to appear even in ordinary rental properties where the owner has no intention of moving back in.

Why Are Fixed-Term Leases Increasing?

The main background factor is the rapid rise in rents, especially in urban areas.

Rents for single-occupant apartments continue to hit record highs, and recently it has been reported that asking rents for family-type apartments now exceed 40% of disposable household income.

In addition to rising rents, other factors are also at play, such as higher construction costs and a decline in new housing supply.
For family-oriented properties in particular, soaring condominium prices have pushed a certain segment of households—who can no longer afford to buy—into the rental market.

Under these conditions, disputes over rent increases are becoming more common.

With regular lease contracts, changes to rental conditions generally require mutual agreement between landlord and tenant.
With fixed-term leases, however, tenants must either accept the conditions proposed at the end of the lease term or vacate the property.

If rents in urban areas continue to rise at this pace, landlords may be able to set higher rents at the time of renewal two years later.
But tenant consent is not guaranteed.

In that case, some landlords may decide from the outset to use a fixed-term lease.
This mindset appears to be one of the key reasons behind the recent increase.

In the past, properties offered under fixed-term leases were usually priced below market rent.
Today, however, due to the shortage of rental housing in urban areas, even properties with the　disadvantage of fixed-term leases are increasingly able to attract tenants at market-level rents.

A Note for Tenants

From a tenant’s perspective, fixed-term leases require careful attention.

In principle, there is no automatic renewal at the end of the contract period, and there is no guarantee of re-contracting.
There is also no assurance that a suitable new residence will be available at the time the lease expires.

For those who wish to live in one place for an extended period, it is essential to carefully check the lease term, the possibility of re-contracting, and the conditions for vacating the property before signing.

What This Means for Overseas Investors

For overseas investors, fixed-term leases are an important but often overlooked aspect of the Japanese rental market.

Many foreign investors assume that rental contracts function similarly to those in their home countries.
In Japan, however, the choice between a regular lease and a fixed-term lease can significantly affect rent revisions, tenant turnover, and long-term exit strategies.

In a rising-rent environment, fixed-term leases may offer greater flexibility in resetting rents at the end of each contract period. At the same time, they can influence tenant stability and vacancy risk.

Understanding how and when fixed-term leases are used in Japan is becoming increasingly important when evaluating rental properties—especially in urban markets.

In Closing

The increase in fixed-term lease contracts is not merely a change in contract structure.
It also reflects a shift in where the balance of power lies within the rental market.

In urban areas where rents continue to rise, fixed-term leases may be becoming a standard tool for landlords to manage risk more effectively.

Going forward, the choice of lease structure is likely to become an increasingly important factor in rental management decisions.