The fire started in one of the shop's 32 private video rooms, each equipped with a TV set and a bed. Smoking was allowed in the rooms. The fire broke out at dawn, when 26 visitors and three employees were in the building.
Such shops are frequently used as a cheap alternative to hotels by commuters who miss the last train home.
"Shortly after 2:30 a.m. [17:30 GMT], I smelled something burning, and opened the door to find the corridor filled with smoke. It was dark, but I managed to get out of the shop after bumping into a few people," the Mainichi Daily News quoted one visitor as saying. "I was just about to go to bed. It's horrifying to imagine that I would have died if I had fallen asleep."
The victims, all of them male, were found in their private rooms or in the corridor. The majority of them died of carbon monoxide poisoning.
Three people are currently in hospital in a serious condition.
Police are currently searching for an unidentified male customer in his 40s who is suspected of setting fire to the room where he was staying.
