Key money and deposit money

What is key money (reikin) and deposit money (shikikin) and how do they work?

Definition of Key Money
Key money (or ‘gratitude money’) written in Japanese is 礼金 (reikin). The first character means ‘thanks’ or ‘gratitude’ and the second character means ‘money’. In Japan it is a non-refundable payment and can often be about the same amount as the deposit money (one to two months rent). To foreigners, the concept of having to provide a non-refundable payment as a gift is outlandish and despised by most foreigners living in Japan. Many of the ‘gaijin friendly’ apartments which don’t have key money compensate by putting the rent up a bit so overtime the payments work out at about the same.

Key money is said to have started around WWII when Japan had a serious lack of leasing space in the cities, so people started paying lessors money as an expression of gratitude for accepting the lease (i.e. a bribe). If the property you are looking at is not in high demand, usually you can bargain down from two months to one. If you want to try bargaining the gift money down, you usually have two attempts. If they still refuse you after that you can be pretty sure they won’t bargain with you and will most likely frown upon your determination as arrogance and lack of understanding of Japanese culture.

Definition of Deposit Money
Deposit money or security deposit money written in Japanese is 敷金 (shikikin). The first character means ‘lay’ or ‘ground’ and the second kanji means money. Another common term used is Houshoukin, written as 保証金, literally meaning ‘guarantee money’. The amount of deposit money you pay is usually one or two months rent and when you leave your apartment the real estate agent will use some of this money to pay for any cleaning/repairs etc. and give you the remaining amount. It is quite common practice in Japan for the real estate agent to over-charge for the cleaning, so if you think you are being overcharged it is a good idea to challenge. I successfully had the cleaning charges dropped for one apartment from 180,000 yen to 90,000 yen by arguing the point. The practice of overcharging seems to have decreased somewhat but it still goes on.

You usually get your deposit money back about 2-4 weeks after you vacate the premesis.