Dec. 8 (Bloomberg) -- Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, said it will raise about 400 billion yen ($4.3 billion) by selling common shares to boost capital, a third less than its target following a slump in its stock price.

The Tokyo-based lender priced the shares at 417 yen apiece, 3 percent lower than its closing price today, it said in a statement. It raised 390 billion yen last month selling preferred shares to a group of seven insurers, after announcing plans on Oct. 27 to increase capital by as much as 990 billion yen.

The bank and four of its largest rivals are seeking to raise more than $30 billion after record declines in domestic shareholdings and overseas investments eroded their capital. Japan’s three largest banks cut profit targets by a combined 61 percent last month as bad-loan costs rose and the economy slowed more sharply than expected.

“Japanese banks are having to shore up their capital given the drawdown in asset values and capital raisings by overseas banks,” said Michael Wood-Martin, a London-based manager of Japanese stocks at Henderson Global Investors who helps oversee about $1 billion. “Mitsubishi UFJ has probably enough capital for now, but I wouldn’t be surprised if they were looking out for more acquisitions.”

The share sale was underwritten by Nomura Securities Co., Ltd., Mitsubishi UFJ Securities Co., Morgan Stanley and JPMorgan Chase & Co., according to the bank.

Mitsubishi UFJ’s share price has fallen 37 percent from Oct. 24, the last trading day before news of its share issuance was first reported in the Japanese press, and 52 percent since announcing a plan to invest in Morgan Stanley in September.

Quarterly Losses

Mitsubishi UFJ invested $9 billion in Morgan Stanley to buy a 21 percent stake in the one-time second-largest U.S. investment bank. It also spent about $3.6 billion to make San Francisco- based UnionBanCal Corp. a wholly owned subsidiary.

The bank’s 390 billion yen sale of preferred shares, announced on Nov. 14, was to a group of domestic insurance companies including Nippon Life Insurance Co., Japan’s largest private insurer. Today’s share sale was valued at about 443 billion yen, according to Mitsubishi UFJ, which will retain about 400 billion yen after paying fees.

The company posted its lowest quarterly profit in at least four years amid losses related to stockholdings and rising bad- loan costs. Profit fell 61 percent to 40.8 billion yen in the three months ended Sept. 30 from 105.5 billion yen a year earlier.

Japan’s gross domestic product contracted at an annual 0.8 percent pace in the three months ended Sept. 30, according to the median estimate of seven economists surveyed by Bloomberg News.

To contact the reporter on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.net

Last Updated: December 8, 2008 05:29 EST