1. Start from your real constraints, not from a map
Choosing where to invest in Japan is not a geography quiz. The right city depends on your capital, your risk tolerance, your time horizon and your operational capacity. A non-resident with a demanding day job and no local team does not have the same play as a long-term resident with fluent Japanese and time to manage renovations.
Before comparing Tokyo to Osaka or Fukuoka, define what you can realistically handle: ticket size, leverage, number of assets, distance and the level of hands-on work you are prepared to take on.
2. Liquidity: why Tokyo is the default benchmark
Tokyo is the deepest and most liquid market in Japan. Listing volume, tenant movement and transaction activity are all structurally higher than in other cities. This does not mean Tokyo is "better" in every scenario, but it means you have:
- More buyers when you want to exit.
- More comparable transactions to validate pricing.
- More granular data at the station level.
For a first investment, many serious investors treat Tokyo as the default benchmark and deviate from it only when there is a clear, data-backed reason to do so.
3. Yield versus depth: how other cities compare
Outside Tokyo, yields and GRM can look more attractive on paper. The trade-off is usually:
- Less depth of demand.
- More dependence on a few employers or industries.
- Less active professional investor presence.
A disciplined investor will ask: "Am I being paid enough for this additional complexity and risk?" Looking only at the yield headline without thinking through tenant resilience and exit liquidity is a common mistake.
4. Data, transparency and your decision process
One of Tokyo’s hidden advantages is the quality and density of available data. Station-level rents, GRM corridors and transaction patterns are richer, which allows you to build a more robust investment process. In thinner markets, you often rely more on broker narratives and sparse comparables.
If your entire strategy is built on being more disciplined and more data-driven than the average investor, starting with the city where the data is strongest is a rational choice.
5. Currency, diversification and portfolio design
For many foreign investors, Japan is one allocation among several countries. In that context, the first question is not "where is the highest yield?" but "what role does Japan play in my portfolio?" Tokyo can act as a relatively stable, income-generating anchor in yen. Regional cities can be treated as higher-beta satellites once the core is in place.
Thinking in terms of portfolio design helps you avoid building an accidental collection of properties with no coherent logic.
6. A practical decision framework
A simple way to decide is to score candidate cities on four axes:
- Liquidity (how easy it is to buy and sell).
- Yield and GRM corridor.
- Data depth and transparency.
- Operational complexity for you specifically.
For many foreign investors, Tokyo scores highest on liquidity and transparency, with a yield that is acceptable when combined with leverage and disciplined underwriting. Other cities may score higher on yield, but lower on the other dimensions. The right answer depends on your risk appetite and your ability to execute.
7. Connecting back to your Japan thesis
City selection is part of a bigger question: why are you investing in Japan at all, and what do you expect this allocation to do for you over time? The main pillar guide "Investing in Japan — Complete Guide" walks through this thesis-building process in more depth, from macro context to station-level execution.