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Japanese Mega-Bank Merger Could Create World's Biggest Bank - 2004-07-16

A mega-bank merger is in the works while Japan's economy continues to show signs of recovery. Those are among the stories in this week's look at Japanese business news.

A planned merger between Mitsubishi Tokyo Financial Group and United Financial of Japan, known as U.F.J., would create the world's largest banking group.

The Japanese financial institutions say they are negotiating a merger to create a company that would have nearly $2 trillion in assets.

Japan's Banking Minister, Heizo Takenaka, says he is closely monitoring the merger talks.

Mr. Takenaka says he is reluctant to offer an opinion on whether bank mergers are good but says both U.F.J. and Mitsubishi Tokyo need to handle the problems they are facing.

Many of Japan's banks are still trying to escape from under a crushing load of bad loans.

U.F.J., the number four bank in Japan, received a government reprimand last month. The government told it to dispose of more of its ballooning bad debts and improve its business practices.

On the plus side, there are more signs the Japanese economy is on the upswing. The cabinet office says consumer sentiment in the second quarter of the year rose nearly one point since March.

Meanwhile, Japan's current account surplus rose nearly 24 percent in May from a year earlier due to rising exports. The finance ministry says the broad measure of trade, tourism and investment flows totaled just below $16 billion before seasonal adjustments.

The number of corporate bankruptcies in Japan fell last month for the 18th consecutive month. The research firm Teikoku Databank says the number of bankruptcies dropped by nearly 20 percent in June compared to a year earlier. For the first half of 2004, bankruptcies in Japan declined about 19 percent.

Microsoft has been issued a warning by Japan's Fair Trade Commission. The agency says the U.S. software giant is engaging in anti-competitive practices by making computer manufacturers agree to restrictive conditions that would prevent patent infringement lawsuits.

The F.T.C. raided Microsoft's Japan offices in February. Microsoft maintains the practice is a fair part of licensing agreements and is lawful.

The first international merger in Japan's legal services industry is in the works.

The British law firm Linklaters says it will acquire the Japanese law practice of Mitsu Yasuda Wani & Maeda.

New legislation permits multinational law partnerships in Japan beginning next April. Japan is one of the few industrialized countries that still prohibits foreign law firms from directly employing domestically-qualified attorneys.