Japanese bank to ask for capital

Japanese banks have not suffered as much as Western banks

Japanese banking giant Mitsubishi UFJ Financial is to ask investors for up to 990bn yen ($10.5bn; £6.85bn) in a bid to strengthen its funding levels.

Like other finance firms, the bank - which is buying part of Morgan Stanley for $9bn - has seen its market value shrink in the falling stock market.

It will issue common stock of 600 billion yen and 390 billion yen of preferred shares.

The announcement came after Japan's Nikkei index closed at a 26-year low.

'Increasing pressure'

"The group aims for enhanced stabilisation of its financial base and further corporate growth as a global financial group by implementing this capital reinforcement," Mitsubishi Financial said in a statement.

Compared with banks in the West, Japanese firms have suffered less of the fall-out from sub-prime-related mortgages in the US. This has allowed them to swallow up parts of various Wall Street businesses.

But the slowing economy is also making life more difficult for Japanese firms.

Credit rating agency Standard & Poor's said the Japanese economy's slowdown was putting "increasing pressure" on the bank's asset quality and that its profitability was being further cut by "reduced demand among borrowers and a decrease in fee income".

On Monday Mitsubishi UFJ Financial shares closed down 15%, after details of the rights issue was leaked.

Further deals

Meanwhile the Nikkei benchmark fell 6.36% to its lowest level since October 1982.

Mitsubishi UFJ announced in September it was buying a slice of Morgan Stanley.

It is the biggest overseas acquisition by a Japanese finance firm and will make Mitsubishi UFJ the biggest shareholder in the US bank.

It has also said it will pay $3.5bn in cash to take full control of UnionBanCal, California's second-biggest bank, and will raise its stake in Japanese consumer lender Acom to 40% from 16%.

Mitsubishi UFJ is the world's second largest bank holding company with $1.1 trillion (£595bn) in deposits.