Japan's major banks have recorded record profits, and U.S. investor Lone Star Funds continued to cash out of its Japanese investments.

The major Japanese banks have announced record profits for the six months ending in September. The six banks' combined profit was $11.8. Mitsubishi UFJ Financial Group, the largest of the banks, reported as much income as Toyota Motors, one of Japan's most profitable corporations.

Economist Stephen Church of Japaninvest says the banks' profitability is a result of reforms to Japan's public and private sectors during the 1990s.

"The private sector led the process, and from 1998, major structural reform took place in the corporate sector, and later in the banking sector," said Mr. Church. "And we are now beginning to see the results."

The National Tax Agency said the declared income of Japan's largest corporations totaled about $200 billion in 2004, marking another record high, and exceeding the $200 billion mark for the first time since the agency started to keep such figures in 1992.

The profit figure was an 18.5 percent rise from the previous year and the second consecutive yearly rise. The agency said the increases reflect an economic recovery.

Most analysts agree that, within the next few years, the world's second biggest economy will finally emerge from the slump of the 1990's, when Japan's asset bubble burst, leading to deflation, debt and slow growth.

In the midst of the good news, U.S. investor Lone Star Funds continued to cash out of Japanese investments. It sold First Credit, a non-bank mortgage lender, to Sumitomo Trust, the Japanese trust bank, for $1.1 billion.

The sale comes on the heels of Lone Star's decision to reduce its stake in Tokyo Star Bank through a public offering next month, and to list its golf company on the Tokyo Stock Exchange. One analyst has suggested the moves could show that Lone Star thinks Japan has reached its business peak.

U.S. life insurers, meanwhile, are looking to expand their presence in Japan, after the government's decision to privatize the country's postal service and its attached insurance business. The American Council of Life Insurers has called on Tokyo to make sure American firms will now be on equal footing with private Japanese firms in seeking new business.