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Mitsubishi UFJ Financial Group Inc.'s (8306.TO) main banking unit will nearly double its planned retail bond issuance to about $3.8 billion, in a bid to prevent the slide in financial markets from further eroding its weakened capital base.

Bank of Tokyo-Mitsubishi UFJ now intends to sell Y350 billion of eight-year subordinated bonds to individual investors - up from its initial plans for a Y200 billion issuance, according to a regulatory filing with Japan's Ministry of Finance Tuesday.

Japan's biggest lender by assets is scheduled to price the bonds Feb. 20 via lead manager Mitsubishi UFJ Securities. The sale period runs from Feb. 23 to March 12 and the bonds will likely carry a coupon between 2.3% and 3.3%.

The planned increase in the issuance size comes at a time when Japanese banks have been struggling with slack domestic lending, a deteriorating economy at home and abroad and hefty losses in the value of their stock portfolios. MUFG's market capitalization has dropped by nearly a quarter since the start of 2009, underperforming a 16% slide in the Nikkei 225 Stock Average.

Those factors have squeezed earnings across the industry for the April-December period, with many banks slipping into losses. MUFG and Mizuho Financial Group Inc. (8411.TO), Japan's third-biggest lender by assets, both swung into the red for the nine-month period, hurt by losses on equity-holdings and inflated bad loans.

With sharp drops in market valuations adding pressure to key solvency ratios at the nation's lenders, a number of big sector players are tapping markets for fresh funds.

Last week, Mizuho Corporate Bank decided to raise funds via eight-year retail subordinated bonds. Total issue size and a coupon - which is to be set between 2.38% and 3.38% - are expected to be decided on Feb. 26, documents filed with the Ministry of Finance showed.

Nomura Holdings Inc. (8604.TO), Japan's biggest brokerage, also said in a shelf registration earlier this month that it will issue up to Y300 billion in common stock, its first such issuance for 20 years. Nomura will issue the stock within a one-year period starting Feb. 20, with some company watchers primed to expect the issue soon rather than later.

 
   -By Megumi Fujikawa, Dow Jones Newswires; 813-5255-2929; megumi.fujikawa@dowjones.com 

(Atsuko Fukase contributed to this story.)