It seems like Japanese VGM has always been pretty expensive.  For example, the G.M.O. albums published back in the 1980's sold for 2800 yen (or roughly $28) each.  And today's multi-disc albums can sell for a lot more than this.

Seeing as here in the US, folks balked at Tower Records' albums priced at $17.99, how did the VGM industry get off the ground in Japan at $28 an album, and how does that expensive pricing continue to be viable today?  I'm genuinely curious...

Well first off, it's hardly VGM, it's Japanese CDs in general. And when the CD was introduced, the yen was actually at a level comparible to prices elsewhere, but their economy did a major flip in the late 80s causing the exchange rate to plummit.

Although not really sales related, the Japanese market has a huge secondhand shop market. And they also (still) have rental stores, where you can rent CDs.

Adding to this, it's hardly just CDs; it's media in general.  CDs generally tend to be about 3000 yen across the board.  Blurays come out at 7000-ish, which is not a lot higher than DVDs used to be.  Some games (DQXI comes to mind) actually come out at near 10k yen.  I remember being shocked when I balked at 5000-6000 yen DVDs back when I lived there and my Japanese friends told me those were actually CHEAPER than VHS when that had been a thing!

I'm also shocked to hear that Blu-rays fetch 7,000 yen, but if that's the case, the price of VGM makes more sense in that context.

Pretty crazy that media in general is being consumed at those prices.  I don't think that would ever fly in the US.

You know what's even more absurd about those bluray prices? It's 7k yen for 2-3 episodes of anime if you import stuff. My wallet did not thank me when I got first two seasons of JoJo's Bizarre Adventure.