Piracy, in Japan ? I've seen very little of it compared to other countries. However they have a large second hand market, which probably has a similar effect on sales.
As for Albums, they are almost collector items. The CDs and packaging are high price / high quality. For example, the bar code, price and other technical data are printed on a separated piece of cardboard (spine card / obi). This is partly to avoid messing with the cover art.
In fact we can argue that the album itself is merchandize.