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British Food Giant Buys Japanese Market - 2003-06-13

Tesco, Britain's largest food retailer, is moving into the Japanese market. It has purchased C-Two-Network, a chain of convenience stores. Tesco says it bought the business for nearly $230 million in cash after more than two years of research.

Japan's retail market is notoriously challenging for foreign companies because of its complex distribution networks and choosy consumers. Many foreign firms fail in Japan, a risk that Tesco's financial Director, Andrew Higginson, says he understands. "The approach will be to go very slowly, very carefully and we will try to do it in a way that respects Japan, its tradition and its customs. If we do that, then maybe we have a chance," he says.

Other western retailers, such as Wal-Mart of the United States and Carrefour of France, have had difficulties in Japan's crowded market, partially due to deflation and the sluggish economy.

Fears over the SARS epidemic, or Severe Acute Respiratory Syndrome, have hurt many Asian economies. But in Japan, which is thought to be free of the disease, it has had the opposite effect. Japanese tourists stayed home to avoid traveling to SARS-affected areas overseas in April, reducing a deficit in the current account.

Because of this, and strong exports to Asia, the current account surplus grew 15-percent that month, marking the first increase in two months. The current account measures the movement of goods and services between Japan and other nations.

But this impact on the Japanese economy will probably be temporary. As fears over the spread of SARS subside, Japanese airlines are increasing their flights to China, Hong Kong and other parts of Asia and more Japanese are expected to travel abroad.

Electronics giant Sony has introduced a line of cutting-edge products under the new brand name of Qualia. Sony's strategy is to sell expensive, high quality items to distinguish itself from Chinese and Korean rivals that sell products cheaply. The new Qualia products include digital cameras, CD players and a color monitor. They will be sold in Japan initially and if they do well, Sony will export them to the United States and other countries.