Key Money (u793cu91d1) and Deposit (u6577u91d1) in Japan: What Landlords Need to Know
If there is one aspect of Japanese rental practice that consistently surprises foreign landlords and tenants alike, it is the upfront payment system. Moving into a Japanese apartment traditionally required handing over several months’ worth of rent before you even received the keys. Two payments in particular u2014 u793cu91d1 (reikin, key money) and u6577u91d1 (shikikin, security deposit) u2014 define this system. Understanding both is essential for any landlord operating in Japan.
What Is Key Money (u793cu91d1)?
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Reikin is a gift of money paid by the tenant to the landlord at the start of a tenancy. The word itself literally means “gratitude money.” Historically, it expressed a tenant’s thanks for being accepted u2014 housing was scarce in postwar Japan, and landlords held enormous power. Tenants paid reikin as a gesture of appreciation and goodwill.
Today, housing supply in most of Japan is more than adequate, but reikin has persisted as a custom in many markets, particularly in Tokyo. Typical reikin amounts range from one to two months’ rent. Crucially, reikin is non-refundable. The landlord keeps it regardless of how long the tenant stays or what condition the property is left in.
From a landlord’s perspective, reikin is attractive because it provides immediate income that doesn’t need to be returned. However, it increasingly deters potential tenants u2014 particularly younger renters and foreigners u2014 who are unwilling to pay a large non-refundable sum. Many landlords are now dropping reikin (listing their property as u793cu91d10, reikin zero) to attract more applicants and reduce vacancy periods.
What Is the Security Deposit (u6577u91d1)?
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Shikikin is a refundable security deposit, typically one to two months’ rent. Its purpose is to cover unpaid rent and damage to the property beyond normal wear and tear. When a tenant moves out, the landlord deducts legitimate repair costs from the deposit and returns the remainder.
This sounds straightforward, but in practice, disputes over deposit refunds were historically very common in Japan. Landlords would sometimes deduct large amounts for repairs that tenants considered normal wear and tear. This led to significant legal reform in 2020 under the revised Civil Code, which codified clear standards for what landlords can and cannot deduct.
Under current guidelines u2014 backed by the Ministry of Land, Infrastructure, Transport and Tourism (u56fdu571fu4ea4u901au7701, kokudo kotsu sho) u2014 landlords cannot deduct from the deposit for: minor scuffs on walls from normal use, faded paint from sunlight, small holes from picture hooks, or general cleaning if the tenant left the property reasonably clean. Landlords can deduct for: damage caused by negligence (such as large holes in walls, pet damage, or burn marks), excessive dirt or staining, and unpaid rent.
The Move-Out Inspection and Settlement Process
When a tenant vacates, the standard process involves a move-out inspection (u9000u53bbu7acbu4f1au3044, taikyo tachiai) conducted jointly by the tenant and a representative of the landlord or management company. Both parties walk through the unit and document its condition. A report is created listing any damage and the estimated repair cost.
Within a reasonable period u2014 typically one to two months u2014 the landlord provides an itemized accounting of any deductions and returns the remaining deposit. Tenants have the right to dispute deductions they believe are unjustified. If a dispute cannot be resolved, it can go to mediation or small claims court.
As a landlord, the best way to avoid deposit disputes is to document the property thoroughly at move-in with dated photographs, provide the tenant with a clear written explanation of what counts as tenant-responsibility damage, and apply deductions fairly and consistently based on established guidelines.
Changing Market Practices and What They Mean for Landlords
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The traditional upfront cost structure u2014 reikin + shikikin + first and last month’s rent + agent fee u2014 could easily total five or six months’ rent before a tenant moved in. This is a significant barrier, and the market has responded.
Many landlords, especially those with older or less competitive properties, have eliminated reikin entirely. Some have reduced deposits to half a month’s rent or switched to rental guarantee insurance schemes instead of traditional deposits. These changes make properties more attractive but shift some financial risk back to the landlord.
The trend is clear: upfront costs are coming down. Landlords who adapt to this reality u2014 by offering competitive upfront terms while protecting themselves through good screening and proper documentation u2014 will maintain lower vacancy rates. Those who cling to high upfront fees in markets where competition is fierce will find their units sitting empty longer than necessary.
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