Sony Music Entertainment (Japan) has reported a 1.4% drop in sales to 167 billion yen ($1.7 billion) for the year ending March 31, 2009.

The Tokyo-based label, which before being supplanted by Avex last year had the largest market share among Japanese record companies, said its operating profit also declined slightly, without providing figures.

But SMEJ’s 1.4% sales drop compares favorably with the Japanese recorded-music market’s 8% decline (according to local labels body the Recording Industry Assn. of Japan) in shipments value in calendar 2008.

Top-selling acts for SMEJ in fiscal 2008 included female vocalists Yui, Mika Nakashima and Miliyah Kato, and the bands PornoGraffiti and Unicorn. The label notes that its talent roster was boosted by the recent addition of BMG Japan to the SME group of companies.

Reflecting the overall decline in foreign-music sales in Japan during the year, SMEJ said international product accounted for 18.2% of its sales, compared with 21% in the previous year.

“It is very difficult to predict future trends of the business, but we are coping with diversifying ways of music distribution,” SMEJ said in a statement. “The music distribution market is expanding, but growth is going to be slow.”