Toys “R” Us is preparing to exit its physical retail operations in Japan by selling its business to Pan Pacific International Holdings, the operator of the Don Quijote discount store chain, according to a person familiar with the matter. The development was reported on September 29.

Toys “R” Us Japan, which operates about 150 stores nationwide and employs approximately 6,000 staff members including part-time workers, has experienced financial losses in recent years. Official records reveal ongoing challenges linked to the country’s declining birth rate and shifting consumer behavior, as more shoppers turn to online purchasing.

The Japan subsidiary, headquartered in Kawasaki, Kanagawa prefecture, is owned by Toys “R” Us Asia and has continued operations even after the original U.S.-based Toys “R” Us filed for bankruptcy protection in 2017. The first Toys “R” Us store in Japan opened in 1991, marking more than three decades of presence in the country’s retail landscape.

Pan Pacific International Holdings, known primarily for the Don Quijote chain, declined to comment on the reported transaction. No additional details such as the terms or timeline of the sale have been disclosed.

The potential transfer of ownership reflects broader challenges facing brick-and-mortar retailers in Japan, where demographic shifts and evolving consumer preferences are prompting companies to reassess their market strategies. Toys “R” Us Japan’s decision aligns with efforts to adapt to a competitive retail environment increasingly dominated by e-commerce and changing family structures.