In Japan, there have always been very small homes; land is expensive and scarce. Land assemblies are difficult because of ownership patterns, and many plots have tiny footprints. People who want to live inside the Yamanote line (a Tokyo ring line that defines the central area) in a house have always had to think small. Now architects are designing houses on sites that are barely larger than western parking spots. "Recently, an increasing number of people, especially in their 30s and early 40s, desire to live in central Tokyo," says Shigeru Kimura, an independent real estate agent who specializes in micro-homes. "And more people are thinking of how to live on a small plot of land."

The house pictured is on a 344 square foot lot for Mayumi Takayanagi. "The thought of leaving her lively and thriving downtown neighborhood with her parents for cheaper and far more spacious housing in the soulless, strip-mall-festooned outlying suburbs of Tokyo just wasn't an option. So she turned to architect Satoshi Kurosaki, 36, to design a new home for no more than $170,000 on a plot that measured only 32 square meters (or 344 sq. ft.). "I'd worked on compact houses before, but this was the tiniest," says Kurosaki. Read ::Business Week and watch the whole ::slide show.