Japan's leading distributor-exhibitor Toho plans to start releasing Japanese films in the DVD format starting with Saimin (Hypnosis), a psycho thriller featuring pop idol Goro Inagaki, which is set for release in June.

Toho has been releasing foreign films on DVD since last summer, but has not offered domestic titles in the format because of problems regarding royalty payments to copyright holders.

With Toho's entry into the market, sales of Japanese films on DVD are expected to expand rapidly, creating a lucrative new source of income for the ailing domestic film industry.

DVD sales in Japan were slow at first because of high software and hardware prices and limited software selection, but enjoyed four-fold growth last year. Boosted by the domestic launch of Sony's PlayStation 2 on March 4, DVD sales are expected to expand even more rapidly this year.

Saimin has earned Y820m ($7.6m) in distributor revenues since its release in the Toho chain last June. The film successfully cashed in on the current popularity of the psycho horror genre in Japan, and Inagaki's pop group SMAP. The video, released last December, has since sold 34,000 units. Toho's next domestic DVD release will be Godzilla 2000 Millennium, the first instalment in its new Godzilla series.