For a country with a reputation of being a technology forerunner, Japan holds on dearly to all things tangible. Four of the world's five biggest newspapers are Japanese. Faxes remain a staple of business communication. And the compact disc is alive and well.

While the rest of the world has abandoned CDs for digital downloads and music shops for the iTunes store, Japan remains a holdout. On Friday, Tower Records Japan's CEO Ikuo Minewaki said the enduring popularity of CDs helps sustain the retail chain here--long after its U.S. parent company went bankrupt in 2006. The Japanese arm has 86 stores in Japan and Mr. Minewaki said more outlets are on the way.

"The Japanese market is very different from the rest of the world," said Mr. Minewaki, speaking to reporters at the Foreign Correspondents Club of Japan on Friday.

While global sales of physical CDs have been plunging under pressure from the digital download market, Japanese CD sales bucked this trend in 2012 with a 9% rise from a year earlier, according to the Recording Industry Association of Japan. Tower Records Japan is majority-owned by Japan's largest wireless carrier NTT DoCoMo Inc.

Mr. Minewaki said CDs continue to do well in Japan because of legal constraints that curbs rapid discounting, a lag in consumers switching from feature phones to smartphones, and the popularity of rental CD shops where consumers can rent then copy music, a cheaper alternative than buying songs or albums online.

But the compact disc business isn't completely immune to the marching popularity of digital downloads—as rival HMV Japan can attest. The music retailer closed its iconic Shibuya store in 2010.

For Tower Records specifically, Mr. Minewaki said it's been successful with so-called 'hand shake events' where you can shake the hands of your favorite idol, or regular in-store concerts. In what should come as no surprise, wildly popular acts like AKB48, the sprawling, Japanese girl-band, are a big draw. "One recent event brought 300 people to the store, and together they bought nearly a 1,000 CDs" said Mr. Minewaki.

AKB48 regularly sells over a million copies on the first day of a CD release, and their songs are a staple on Japan's single charts together with music from squeaky clean boy band groups that emerge from Johnny's Entertainment.

"In Japan, we enhance the actual experience of buying the CD," he said. "But online music is growing quickly, and eventually in-store CD sales will be replaced by online sales."

Corrections & Amplifications: Compact discs use digital technology. An earlier version implied that CDs are purely analog.

The final quote in the story has been changed to accurately reflect Mr. Minewaki's comments. A previous version incorrectly quoted Mr. Minewaki as saying "but digital music is growing quickly, and eventually CDs will be replaced."