MITSUBISHI UFJ Financial Group Inc, the Japanese bank investing US$9 billion in Morgan Stanley, may raise as much as 1 trillion yen (US$10 billion) in additional capital, the Nikkei newspaper said yesterday.

Japan's biggest lender may sell shares before March 31, to improve its finances due to unrealized losses on stock holdings, the newspaper reported, without saying where it obtained the information.

Takashi Takeuchi, a spokesman at Tokyo-based Mitsubishi UFJ, declined to comment on the report.

Shares of Japan's six biggest banks including Mizuho Financial Group Inc fell in Tokyo last week on concern that profits may decline as the global credit crisis pushes the world's second-biggest economy toward a recession. Bankruptcy debt in the nation almost tripled in the six months ended September 30, according to research company Teikoku Databank Ltd.

The benchmark Nikkei 225 Stock Average has fallen 32 percent this month, eroding the value of shares the banks hold as part of their capital. Stocks in the index are trading at an average of about 90 percent of their book value, compared with 1.3 times for the 1,730 member shares making up the MSCI World Index.

Finance Minister Shoichi Nakagawa said on October 17 that Japan should change mark-to-market accounting regulations if current rules are found to cause "systemic risk."

Masamoto Yashiro, chairman of Shinsei Bank Ltd, three days later urged immediate suspension of mark-to-market accounting for about two years, as an emergency measure to deal with the global financial crisis that's forcing companies to book losses on illiquid holdings.

Mizuho, Sumitomo Mitsui Mizuho, Japan's second-largest bank by revenue, and Sumitomo Mitsui Financial Group Inc, the third-biggest, may also raise several hundreds of billion yen in additional capital to offset losses on their share holdings, public broadcaster NHK reported, without citing its sources.