Toys "R" Us, Which Helped Open Japan's Retail Market, to Come Under Don Quijote's Umbrella After 35 Years

[Financial News, Tokyo—Correspondent Seo Hye-jin] Toys "R" Us, the U.S.-based toy chain that helped open Japan's retail market, is withdrawing from local store operations 35 years after entering Japan. It lost customers to big-box electronics retailers that grew on the back of regulatory easing prompted by its entry. The operator of Don Quijote is expected to take over about 150 stores and target demand for adult toys.
According to the Nihon Keizai Shimbun, also known as Nikkei, on the 30th, Pan Pacific International Holdings (PPIH), the operator of Don Quijote, is expected to acquire Toys "R" Us Asia's Japanese business as early as late October. The acquisition could be worth approximately ¥10 billion, or about 86.3 billion won. The roughly 150 Toys "R" Us and Babies "R" Us stores, along with their employees, are expected to be retained. PPIH said, "There is nothing we can comment on."

Toys "R" Us opened its first store in Japan in Ibaraki Prefecture in 1991. At the time, Japan restricted the opening of large stores under the Large-Scale Retail Stores Law to protect local shopping districts. The U.S. government demanded revisions to the law during U.S.-Japan structural talks, and Toys "R" Us's entry became a catalyst for regulatory easing. Then-U.S. President George H. W. Bush also attended the opening ceremony for the company's second Japanese store in 1992.
It also disrupted the toy industry's practice of selling products at fixed prices. By purchasing goods directly from manufacturers and selling them cheaply in warehouse-style stores through an "everyday low-price" strategy, the company became Japan's largest toy chain within five years of entering the market. At its peak, it operated more than 160 stores.
However, regulatory easing also paved the way for competitors to grow. YAMADA-DENKI and AEON expanded their large-format stores, while big-box electronics retailers began selling toys and games in the mid-2000s. As customers shifted to rivals offering loyalty points, Toys "R" Us began posting weaker results around 2005. The subsequent surge in online shopping added to the pressure.
Toys "R" Us in the United States filed for bankruptcy in 2017 and liquidated its U.S. operations the following year. Toys "R" Us Japan, operating under the company's Asian division, continued its business but recorded losses for eight consecutive fiscal years, compounded by the COVID-19 pandemic. Its net loss for the fiscal year ending in December 2025 was ¥3.7 billion, or about 31.9 billion won.

Japan's toy market has instead grown. According to the Japan Toy Association, the market reached ¥1.1664 trillion in fiscal 2025, up 6% from the previous year and setting a record high for the fifth consecutive year.
The main growth drivers have changed. As demand for children's products declines due to the falling birthrate, adults who enjoy hobbies from their childhood—known as "kidults"—and inbound tourists have emerged as new customer groups. Card games and trading cards have become the largest product category, accounting for about 30% of the overall market.
Yodobashi Camera and other retailers moved to capture demand with game and card-game stores and limited-edition products. Toys "R" Us, by contrast, did not launch its specialty-store business for kidults until last March. Its "lowest-price guarantee" also lost some of its edge after online stores were excluded from the comparison set beginning in April 2024.
PPIH is expected to retain the Toys "R" Us name for the time being while expanding its adult-toy offerings. Its plan is to increase contact points with family customers, use the insights to develop new products for Don Quijote, and strengthen ties with major toy manufacturers.
[email protected] Seo Hye-jin Reporter