The retailer is hoping to strengthen the brand throughout Asia following the agreement to unify both businesses.
Toys R Us has detailed plans to unify its Toys R Us, Japan business with its Toys R Us business in Greater China and Southeast Asia.
The joint venture between the retailer and Fung Retailing Limited will see Toys R Us, Japan, which operates 160 stores in the country, become part of Toys R Us, Asia Ltd.
"This expansion marks another milestone for Toys R Us as a global company," said Dave Brandon, chairman and CEO of Toys R Us, Inc.
"The businesses are highly complementary with regards to markets, products and technology, and we believe that the strategic decision to consolidate them will allow us to streamline operations and accelerate innovation to continue to deliver a world-class experience for our customers in Asia.
“We look forward to working more closely with Fung Retailing, our trusted and valued business partner, as we further our mission to be the best toy and baby products retail company for the world."
Following the agreement, the combined business will now be approximately 85 per cent owned by Toys R Us, Inc. and approximately 15 per cent owned by Fung Retailing.
Dr. Victor K. Fung, chairman of Fung Group, added: "We have been involved with Toys R Us in Asia since 1985 and are pleased to expand our partnership to include Japan. Toys R Us is one of the most recognised brands in the world, and our goals for the combined business are to leverage the synergies between the businesses and delight a new generation of consumers with significant purchasing power across the region."