US toys retailer Toys“R”Us will withdraw from Japan as early as the end of this year, Nikkei Asia reported, citing unnamed sources.

The report said a declining birthrate is making business in Japan increasingly difficult, with Toys“R”Us Japan posting net losses for eight straight years through December 2025.

Pan Pacific International Holdings (PPIH), operator of the Don Quijote discount chain, will acquire all 150 Toys“R”Us stores in Japan, including Babies R Us outlets that mainly sell infant items.

It will take over the business from Hong Kong-based parent Toys“R”Us Asia and continue to employ Toys“R”Us Japan's staff.

The sources said the total acquisition cost could reach about Y10bn ($63.7m).

The Toys“R”Us name will stay for a time before being dropped from every store.

PPIH will develop a new business format and rebrand the outlets, adding products for children and adults, such as card games.

The business has operated in Japan for 35 years, opening its first outlet in Ibaraki prefecture in 1991, a move seen as a result of the US-Japan Structural Impediments Initiative, under which Washington pushed Tokyo to remove trade barriers.

It adopted an everyday low-price strategy when Japan's toy industry sold at list prices and had more than 160 outlets at its peak.

Toys“R”Us Japan became a wholly owned subsidiary of Toys“R”Us Asia in April 2017.

The parent company Toys“R”Us filed for bankruptcy in September 2017 to address $5bn of long-term debt, after struggling to compete with rivals such as Amazon and Walmart while lacking the funds to make improvements.

WHP Global acquired a majority stake in Tru Kids, parent of more than 20 retailers including Toys“R”Us and Babies R Us, in March 2021.

Earlier this month, Toys“R”Us announced plans to add 120 outlets to its standalone US network in the coming months, in partnership with Go! Retail Group.