Mitsubishi UFJ Financial, the Japanese megabank buying a chunk of Wall Street giant Morgan Stanley, said on Monday it would tap investors for up to 10.5 billion dollars to weather the financial crisis.

MUFG plans to issue shares worth up to 990 billion yen to strengthen its financial soundness following a drop in the value of its shareholdings as well as a nine billion dollar investment in Morgan Stanley.

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

The bank said it would issue common stock worth up to 600 billion yen and preferred shares valued at 390 billion yen.

Japanese financial firms are believed to be less exposed to losses related to troubled US mortgage loans compared with many Western banks, giving them the opportunity to snap up stakes in troubled Wall Street giants.

But they are being squeezed by a plunging stock market and a Japanese economy on the brink of recession.

"The recent slowdown of Japan's economy and falling stock prices are increasing pressure on MUFG's asset quality," credit rating agency Standard & Poor's said in a statement.

"The company's profitability is also being pressured by reduced demand among borrowers and a decrease in fee income, mainly from sales of investment trusts," it added.

Mitsubishi UFJ shares lost 15 percent to end at 583 yen Monday after a local newspaper leaked details of the planned capital hike. The Nikkei stock index fell 6.36 percent to the lowest level in 26 years.

The report in the Nikkei business daily said Japan's two other megabanks -- Mizuho Financial and Sumitomo Mitsui Financial -- may follow with capital hikes of their own.