A man who appeared to be in his 50s or 60s was seen carrying a bag of liquid into the building, before knocking it over near a heater, spilling the liquid and starting the fire, Kyodo News reported.
The man was rushed to hospital and is in a critical condition, NHK reported.
Emergency services were alerted shortly after 10:00 local time (01:00 GMT) on Friday.
“There was lots of dark smoke,” one eyewitness told NHK, adding: “There was a very strong smell, too.”
The victims suffered cardiopulmonary arrest, a term often used in preliminary reports before a death is officially confirmed, reports say.
Footage showed blackened windows after dozens of firefighters extinguished the blaze on the fourth floor.
All of those feared dead were reportedly in a psychiatric clinic on the fourth floor of the building, located in a busy commercial and entertainment district.
Another witness said she saw a woman in the building calling for help.
“When I looked outside I saw orange flames at the fourth-floor window,” she told Kyodo News. “A woman was waving her hands for help from the sixth floor.”
Some people were evacuated from the building by fire crews using ladders.
The blaze was successfully extinguished within half an hour, after it burned across an area of approximately 20 sq m (215 sq ft), the local fire department said.
No damage has been reported to other floors within the building or any neighbouring properties.
Last year, Japan saw one of its worst mass casualty incidents since World War Two after a man set fire to a film studio in Kyoto in 2019, killing 36 people.