The announcement was made by Usen CEO Yasuhide Uno at the semi-annual shareholders meeting yesterday (April 16).
Gaga Communications will cease acquisition of foreign films, while subsidiary Gaga Films will cease in-house production by this August.
However, Gaga is likely to remain active in film distribution supplied by a new external company, set up by Uno himself,with outside investors.
'The possibility of a new company being established is under consideration to carry on its production and acquisition operations, even though Usen group itself made the decision to withdraw from such business,' an Usen group spokesperson told Screendaily.
Gaga will also continue to distribute its upcoming slate which includes Rambo (May 24), Japanese thriller Climber's High (July 5) and the autumn release of Sex And The City.
The company is currently enjoying success with The Golden Compass which has grossed over $32m, making Japan the third most successful territory in the world after the US and UK.
However, in its interim results, Uno stated that despite other recent successes such as nature documentary Earth ($22.7m), one of the highest-grossing documentaries ever released in the territory, acquisition and production activities were generally unprofitable. Gaga posted losses of $4.9m in the first half of fiscal 2008.
Usen, which also operates online contents portal GyaO, also announced the launch of its 'GyaO Stream' service, which provides streaming services to corporate clients. In addition, Usen's 'GyaO Next' TV-based pay service will be relaunched in June.
In January, Usen announced the dissolution of its $294m (Y30bn) contents fund, established to underwrite films and other content streamed through GyaO, which had only raised $58.84m (Y6bn).
However an Usen spokesperson said the company 'plans to keep its focus on overall contents business, including, but not limited to GyaO and Gaga.'