Tesco, the UK's largest retailer, has decided to quit Japan after eight years in the market.

The company this morning (31 August) announced plans to sell its operations in Japan, where it has 129 stores, but where sales fell more than 8% in the retailer's last financial year.

"Having made considerable efforts in Japan, we have concluded that we cannot build a sufficiently scalable business," CEO Philip Clarke said. "We have decided to sell our operations there and focus on our larger businesses in the region, in line with our priority of driving growth and improving returns."

He added: "With good stores in good locations across Greater Tokyo, we will be undertaking a formal sale process over the coming months and the business will continue to trade as usual in the meantime."

Tesco said Japan was the smallest of its international businesses. The company runs stores under the Tsurakame, Tesco and Tesco Express formats and said over half the outlets are profitable.

There had been some speculation over what Clarke, who became Tesco CEO in March, would do with the retailer's Japanese business.

The fall in sales last year prompted claims that Tesco could look to quit Japan, although analysts were divided on whether the retailer would leave the market.

In May, the speculation intensified when Tesco moved Michael Fleming, the head of its Japanese business, to a newly-created role of group strategy director.