Tesco is paying �139m ($229m) for what it calls: "A small and thoughtful entry into an exciting, but complex and challenging market."

The Japanese firm is a food retailer with 78 stores, mainly in Tokyo, as well as some wholesaling.

Tesco has been looking for acquisitions in Japan for the past three years.

Sir Terry Leahy, the chief executive, described it as the next step in the company's international strategy.

He said the chain was profitable with good stores in good locations.

"C Two-Network is a great success in Japan and will provide Tesco with an excellent opportunity to enter a large and unconsolidated market with potential for growth."