OBJECTIVES: Japan has been facing an aging society and the burden of illness for vertebral compression fracture (VCF) has become a significant issue from an economic point of view as well as clinical point of view. Reduction of pain and improvement of quality of life with VCF patients after balloon kyphoplasty (BKP) was confirmed in a randomised controlled trial (Fracture REduction Evaluation (FREE) trial). Objective of this study was to examine a cost-effectiveness of BKP in comparison with conservative medical management (CMM) for VCF in patients with osteoporosis in Japan. METHODS: A disease event simulation model was used to estimate a lifetime cost-effectiveness of BKP compared to CMM for female VCF patients (70-year-old) with osteoporosis in Japan. Payer's perspective was employed and only medical costs were estimated. BKP material price was set at JPY500,000 (€3650, €1=JPY137). Utilities were obtained from the FREE trial. Costs and quality-adjusted life years (QALYs) occurring beyond 1 year were discounted at 3% per year. Cost-effectiveness was evaluated by ICER (Incremental Cost Effectiveness Ratio). RESULTS: BKP was associated with increased QALYs (0.308 QALYs) compared to CMM. The incremental cost-effectiveness ratio for BKP compared to CMM was JPY1,399,947 (€10,219) per QALY gained. Probabilistic sensitivity analysis indicated a 76% likelihood that BKP would be considered cost-effective in Japan with a willingness to pay of up to JPY 6 million (€43,796) per QALY gained. CONCLUSIONS: Compared to CMM, BKP for Japanese VCF patients was projected to improve QALYs and regarded as cost-effective.