If you own the property you run as a short-term rental in Japan, depreciation (減価償却) is probably the largest single line item you can deduct — and one of the most misunderstood by foreign operators.
I’ve spoken to investors who bought properties in Japan, ran them as Airbnbs for two or three years, and never once claimed depreciation because they didn’t know they could. I’ve seen others deduct over the wrong useful life because they misread the table. Neither is a great outcome. Here’s how it actually works.
A listing comes across your feed: “Tokyo guesthouse, ¥35M, gross yield 8%.” That number sounds reasonable — maybe even good by Japanese real estate standards. You start running mental math.
Here is the problem: gross yield is almost always the wrong number to base a decision on.
The listing broker sends over a one-pager. Gross yield: 8.5%. The property is clean, walkable to the metro, previous operator averaged ¥18,000 a night. Back-of-envelope math looks reasonable. Three months after closing, you’re sitting at 54% occupancy and wondering where the return went.
This is not an unusual story. It’s the standard story. And the problem almost always traces back to one thing: how occupancy was assumed.
Japan has been on sale for international investors for the better part of this decade. If you’re holding USD, EUR, or GBP and you’ve been watching the Japan hospitality space, the yen’s extended weakness has done something curious to the investment equation — it’s made Japan look cheap from the outside, while Japan’s own inbound tourism boom has made hospitality look lucrative from the inside.
But “cheap currency plus tourism boom equals buy now” is a shortcut, not an analysis. Yen weakness runs through every layer of the investment math in ways that are easy to misread. Let me break it down properly.
If you’ve been looking at buying a small hotel, guesthouse, or minpaku property in Japan, the yield numbers in the sales brochure probably looked pretty good. Maybe 8%. Maybe 12%. Maybe someone used the word “cap rate” and your eyes lit up.
I’ve been operating hospitality properties in Japan for several years, and I can tell you: the number on the brochure and the number that hits your bank account are often very different. Not because anyone is lying — though some are — but because the gross yield calculation that gets thrown around leaves out a significant chunk of real operating costs. Here’s how to think about it properly.