The ol’ “Big in Japan” adage is set to take on new meaning with recent statistics suggesting Japan will overtake the United States as the world’s biggest music market this year.

According to a 2012 report by the International Federation of the Phonographic Industry (IFPI), Japan contributed US$4.42 billion to global recording industry revenue last year, only 1.3 percent less than the United States on $4.48 billion. The Australian recorded music market also grew to AU$398.134 million last year, up a healthy 4 percent.

But while the US market shrunk by 0.5 percent from 2011 to 2012, the Japanese market actually increased by 4 percent, bucking a global slowdown in sales, as evidenced by the other three in the IFPI‘s top five: UK (-6.1 percent), Germany (-4.6 percent) and France (-2.9 percent). If things keep up this way, it would appear Japan will soon reach the Mount Fuji summit of global music sales.

Given demand is now bigger than Godzilla, how exactly are Japanese music fans spending their hard-earned yen? Interestingly, a further breakdown of the statistics reveals the sale of CDs, DVDs and other physical formats in Japan increased by 11 percent last year. At present, Japan’s market makes 80 percent of its revenue from physical sales (easily outdoing the global 57 percent average), with sales in the first quarter of this year still strong.

Although it may come as a bit of a surprise in this day and age of music streaming websites like Spotify and illegal downloading, Japan’s obsession with a good old-fashioned CD can be attributed to a few things.

Much like South Korea’s K-Pop, a portion of the increase in physical sales in Japan has been attributed to a reinvestment in the marketing of J-Pop artists. Last year, the number of J-Pop CDs sold (166.4 million) surpassed the sale of digital tracks (150.1 million). This has been linked to Japanese record companies offering fans something tangible with the physical edition, whether it’s promotional stickers, tickets or a collectible CD case.

Speaking to The Guardian, Sandy Monteiro, Southeast Asia president for Universal Music, says that some J-Pop and K-Pop artists will release the same album in various physical formats and that fans are encouraged to collect them all.

“CDs are becoming the new merchandise in Asia,” Monteiro explains.

Also influencing the upward spike in physical sales in Japan is the government’s amendments to copyright laws, which propose up to two years jail and fines of up to 2 million yen (AU$22,120) for those caught illegally downloading or trading pirated material.

The outlook isn’t quite so rosy for digital sales in Japan – comprised of a combination of mobile ringtones, singles, albums, music videos, and subscription services –, which slumped 25 percent in 2012. This follows a global downward trend for digital sales, with faster internet connections and online piracy hampering overall revenue.

Australia is following a similar trend. While we forked out AU$184.303 million for digital and $213.831 million for physical last year, online piracy is still hampering the Australian market and will potentially be exacerbated with the introduction of the National Broadband Network this year (giving 90 percent of the population access to high-quality broadband internet).

“Australia does not have a legislative ‘graduated response’ process, nor does it have a process for site blocking,” the IFPI observes in its report.

While CD sales will probably never return to the levels experienced during the 1990s, it is worth noting that global music sales increased by 0.3 percent last year, the first time figures have jumped since 1999.