By Peter Masheter,
Japan's capsule toy industry has come a long way from the corner of the supermarket, as it enjoys a new boom at home that is spurring multiple market players to set their sights on overseas expansion.
It follows the industry's massive growth in the years around the pandemic, as specialized capsule toy stores have drawn in new customers from a wider demographic.
The Japan Toy Association estimates the capsule toy market was worth 61 billion yen ($379 million) in fiscal 2022, up 35.6 percent in one year and expected to climb further.
"We probably still have about two years of headroom in the Japanese market, but there's just a physical limit to how many stores can open in shopping centers and bring in new business," said Daisuke Morikuni, director of the capsule toy department at Yell Co., a toy and prize maker focusing on producing original character designs.
Insiders say about 600 to 700 product series are set to be released each month this summer by around 60 toymakers in the business.
In an industry where licensed figures such as anime characters are lucrative but legally cumbersome to sell overseas, Yell is expanding into Asian markets such as Taiwan and South Korea with its offbeat, cute toys, including its headline range of praying animal toys. Overseas customers make up about 10 percent of its capsule toy sales.
Capsule toys in Japan are typically obtained via analog-style dispensers in which customers insert a few hundred yen and turn a handle to release a prize. They are known by names such as gacha-gacha or gasha-pon -- an onomatopoeic phrase for the sound of the turning handle, and the thud as the capsule drops.
According to Tomy Co., better known as Takara Tomy and one of the two big players in the market along with Bandai Co., the forerunner to today's dispensers were first imported from the United States by Penny Sales Co. in 1965.
Their true breakthrough came in 1983, when erasers shaped like the buffed-up titular character from the anime and manga 'Kinnikuman' ignited a craze among children, resulting in Bandai selling 180 million of these toys at the time.
Today the market has diversified to include local products and miniaturized versions of everyday products such as washing detergents and bags of chips, which have proved popular with adult women.
An April consumer survey by Happinet Corp., which runs the Gashacoco chain of capsule toy stores, showed more than half of women in their 20s and 30s have bought at least one capsule toy since entering adulthood.
"With Japan's child population falling, the last ten years have seen makers shift to capsule toys with adults in mind," says Yusuke Tsuzuki, who doubles as director of the Japan Capsule Toy Association while also head of Dreamcapsule Inc., which operates the Dream Capsule store chain.
Currently, his business runs around 50 outlets across the country, whereas the chain comprised about 10 shops before the pandemic.
Store chains like Tsuzuki's have expanded in part due to COVID emptying out units at shopping malls, he said, thanks to their ability to operate them with few staff members given they are mostly filled with analog vending machines.
"Capsule toys used to be on street corners, inside supermarkets. But with the specialized stores, it turned out that having 100 or so capsule toy options in one place improves the conversion rate -- as in how likely someone is to buy something," said Yoshihiko Takahashi of exporter Hobico Ltd.
The popularity of capsule toys at home is encouraging entrepreneurs like Takahashi to try their hand at new markets abroad, too.
The former metals trader is focusing on Dubai, as the Middle East is a fertile market for Japanese goods, with Takahashi citing the recent news that Saudi Arabia will host the world's first "Dragon Ball" theme park.
So far Takahashi's company has succeeded in setting up toy machines at six Japanese restaurants in the gulf city to dispense prizes for kid's lunches. He sees the capsules as a low-cost backdoor product to get overseas businesses interested in importing more expensive items, such as sake.
He also aims to expand to airports, taking a cue from the capsule toy banks in Japanese airports that have proved a hit with inbound travelers looking to spend spare yen before flying home.
Indeed, capsule toys are no exception to the benefits brought by inbound tourism in Japan in 2024, with the last three months seeing more than 3 million visitors enter per month and the country on track for its best-ever year for the tourism industry.
At the Magnet by Shibuya109 branch of Dream Capsule overlooking tourist hotspot and Tokyo icon Shibuya Scramble Crossing, around 70 percent of the customers who come through are visiting tourists, the company says.
On the day Kyodo News visited, a mix of sightseers and locals were browsing the capsule banks, with some videoing their purchases for social media, while one enthusiast could be seen using the torch on her smartphone to check to see if the dispensers had that one toy she is still missing.
Its manager, Shosuke Sen, said that foreign customers are particularly keen on anime figures from mega-hit series such as "Jujutsu Kaisen" and "Demon Slayer: Kimetsu no Yaiba," as well as costlier "premium" capsule toys thanks to the yen's weakness.
Cecilia Martinez, a 43-year-old from Sweden shopping with her husband and two young sons, said she had first discovered capsule toys on their current visit to Japan. She said she was taken by "the cuteness of it. There's figures, there's key chains, there's bags...My kids though, they're not as interested as I am. I guess it's my generation," she said.
Yell's Morikuni said he thinks the toys' slight nature is key to their appeal with adults. "Their image is cheap toys that give people a little hit of joy, a bit of fun."
"That's a strong draw for people visiting Japan, too, it's not necessarily that they really want them, but they're kind of interested...That's how we think about the toys, making something people realize they like when they see it."
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