Tesco to offload Japan unit in £40m deal Tesco is poised to pay Aeon of Japan £40m to take its lossmaking Japanese business off its hands. Under the deal, which has taken almost a year to come to fruition, Tesco will sell 50 per cent of its shares in its Japanese business to Aeon for a nominal sum of Y1. The two companies will form a joint venture, and Tesco will invest £40m to fund further restructuring. They will jointly manage Tesco's 117 stores in Japan, which the UK group had been looking to sell since it decided to quit Japan last August. However, the wide range of Tesco's store formats in Japan made it difficult for any one group to acquire the entire portfolio, which was one of Tesco's conditions for a sale, Aeon said. Aeon is later expected to acquire the remaining 50 per cent in the joint venture. Tesco said that after the £40m payment it would have "no further financial exposure to the Japanese business or its operations." Last year, Tesco Japan made trading losses of £35m, while it took a £131m goodwill writedown on the Japanese assets two years ago. In spite of acquiring C Two Network, a discount supermarket chain, in 2003, Tesco struggled to make its mark in Japan, where competition among retailers is fierce and profit margins are low. Aeon, one of Japan's leading supermarket groups by revenues, has expanded aggressively by acquiring weaker competitors. Tesco's willingness to put the Japanese business up for sale - Philip Clarke's first big strategic decision since becoming chief executive in March 2011 - has been interpreted as a sign he is prepared to cut struggling businesses loose. Inevitably this has turned the spotlight on Fresh & Easy, Tesco's lossmaking US arm. Last year, Mr Clarke embarked on a turnround plan for Fresh & Easy, including revamping stores to make them warmer, and introducing bakeries and takeaway coffee. It has also opened smaller express stores and introduced a version of its successful Clubcard loyalty scheme. However, in April Mr Clarke said Fresh & Easy would not break even this financial year, and last week revealed a sharp slowdown in sales from US stores open at least a year. Clive Black, analyst at Shore Capital, said: "The US has had a number of not just reminders, but clear messages that there has to be an improvement, or the same will happen to it." Aeon, which is expanding outside Japan and has plans to open 2,000 stores in China in 10 years, could learn from Tesco's expertise in markets outside Japan, said an Aeon representative. Takayuki Suzuki, an independent retail analyst, said: "The tie-up could lead to further co-operation in overseas markets." Tesco shares were up 0.7 per cent at 303.08p in afternoon trading.