Mitsubishi Tokyo Financial Group Inc. and Merrill Lynch & Co. have entered into the final round of negotiations to set up a securities company focusing on wealthy individuals, sources said.

The joint venture, to be equally owned by MTFG and the U.S. investment bank, will be established in fiscal 2005 at the earliest, the sources said. A basic agreement on the deal could be reached this month.

The new venture will specialize in private banking, and will market a wide range of financial products for well-heeled customers.

MTFG's latest foray into the securities sector is aimed at reinforcing financial services for its retail customers.

MTFG is scheduled to merge with UFJ Holdings Inc. in October to form the largest domestic financial group, Mitsubishi UFJ Financial Group Inc., with 40 million customers and about 66 trillion yen in assets.

The Merrill Lynch venture plans to target the financial group's 2 million individual customers that are worth 10 million yen or more each.

Analysts say it will be essential for the Mitsubishi UFJ group to reinforce its securities operations to effectively market financial products such as investment trusts.

But Mitsubishi UFJ Securities Co., to be formed through the merger of Mitsubishi Securities Co. and UFJ Tsubasa Securities Co., can hardly match industry leaders like Nomura Securities Co. in terms of assets, sales networks and product development capability.

The new joint venture will take over financial assets and employees from Merrill Lynch Japan Securities Co., which has also focused on private banking services.

Merrill Lynch's wholly owned Japanese subsidiary has been struggling due to a relatively weak customer base compared to those of domestic brokerages. The company underwent comprehensive restructuring in 2002.

Some workers from the Bank of Tokyo-Mitsubishi and other related units at both partners will be transferred to the new joint venture.

Merrill Lynch, headquartered in New York, set up Merrill Lynch Japan Securities in 1998, taking over employees and outlets from failed Yamaichi Securities Co.

It entered the Japanese market in 1961.(IHT/Asahi: March 5,2005)