The casualties occurred after the knife-wielding man set alight the office block of the Keikyubin Keikyubin courier firm in Nagoya after first taking the staff hostage.
Television images showed paper and glass flying through the air and screams could be heard as an explosion ripped through the third floor offices of the company in the industrial city, 270 km (170 miles) west of Tokyo.
Japanese public television said the hostage-taker, identified as 52-year-old Noboru Beppu, was among the dead together with the firm’s manager and a police officer.
Police said Beppu had taken eight employees hostage and barricaded himself into the office earlier in the day.
He then doused the area with a liquid and threatened to set the building on fire, demanding that he be paid three months’ worth of wages.
Seven of the eight hostages were released before the blast and are unharmed, media reports said.