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Thursday, 14 March, 2002, 12:49 GMT
Wal-Mart takes on Japan
Shoppers in Tokyo's Shibuya district
Japanese shoppers are spending less
Wal-Mart, the world's biggest retailer, has taken its first step into the Japanese market by buying a stake in the Seiyu supermarket chain.

The US-based group has agreed to pay 6bn yen (32.4m; $46m) for a 6% stake in Seiyu, Japan's fifth largest supermarket.

The deal gives Wal-Mart an option to take control of Seiyu over the next five years by paying a further 260bn yen for ownership of up to two thirds of the Japanese retailer's shares.

Wal-Mart said the partnership would bring it "a solid platform in the Japanese retail market".

Two of Japan's major supermarkets have gone bankrupt in the last couple of years, thinning the ranks of Wal-Mart's competitors but raising questions about how strong its prospects are.

Long term dream

Wal-Mart tried to enter the Japanese market two years ago and began talks with Daiei, the country's biggest supermarket.

A Daiei supermarket
Daiei faces an uncertain future

Its efforts failed when Daiei pulled out of the negotiations.

However since then slack consumer spending and falling high street prices have driven two major Japanese retailers, Sogo and Mycal, to bankruptcy.

Daiei was only rescued from the same fate by a bailout from its bankers earlier this year.

Reluctant consumers

Japanese shoppers' trust in food retailers has also taken a blow from the Snow Brand scandal.

Snow Brand Food admitted relabelling foreign meat as domestic to side-step veterinary safety regulations over mad cow disease and qualify for state handouts.

"It will be a long-term story to see if Wal-Mart can take advantage of the merits of the Japanese market", said Yasuyuki Sasaki, retail analyst at Credit Suisse First Boston in Tokyo.

In its favour, Wal-Mart buys many of its goods from nearby China, spending $10bn there last year.

The US giant has expanded abroad rapidly since its first overseas store opening in Mexico in 1991.

In only a decade, it has gained 1,170 stores in Latin America, Britain, Germany, Korea and China.

Wal-Mart's investment in the Japanese retailer is part of a three-way deal to strengthen Seiyu.

Another shareholder, Sumitomo Corp, has paid Seiyu 5bn yen to increase its shareholding to 15.6% from just over 10%.

See also:

19 Feb 02 | Business
Wal-Mart defies recession
18 Jan 02 | Business
Lifeline for Japan supermarket group
15 Jan 02 | Business
Megabank opens in Japan
22 Feb 02 | Business
Tainted Snow Brand shuts up shop
09 Jan 02 | Business
Daiei could get debt relief
07 Dec 01 | Business
Japan falls into recession
07 Dec 01 | Business
Japanese shoppers reluctant to spend
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