Japan Exit Could Leave Tesco Better Poised To Pursue Asian Growth

After an eight-year struggle of building considerable scale in Japan, UK mass grocery retail (MGR) player Tesco has decided to exit the Japanese market. Clearly, growth prospects in the Japanese MGR market are hardly inspiring and Tesco will have to sharpen its focus on higher-growth assets to truly compensate for weaker growth opportunities in its domestic market of the UK. In our opinion, Tesco's assets in Japan are unlikely to attract strong interest from global retailers such as Wal-Mart and Carrefour given the retailers' expansionary ambitions in emerging markets (EMs). Rather, stronger interest in Tesco's Japan assets is more likely to come from Japanese retailers as they look to build greater domestic scale.

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