Japan's UFJ banking group Wednesday approved a plan to merge with Mitsubishi Tokyo Financial Group Inc., which would give rise to the world's largest banking group in assets.

The merger is expected to take place at the end of March with total assets of 190 trillion Japanese yen (1.76 trillion US dollars), replacing the Mizuho Financial Group Inc.

Under the plan, four banks under them are to be reshaped into two within two to three years.

If realized, the merger would help the financial giant get out of operational trouble. UFJ Holdings Inc. incurred a group net loss of 402.81 billion yen (3.73 billion dollars) in fiscal 2003, compared with the previous year's loss of 608.92 billion yen (5.64 billion dollars).

UFJ Holdings and UFJ Bank also were ordered last month by the Financial Services Agency to improve their business.

As of March, Mitsubishi Tokyo Financial Group had total group assets of 106.6 trillion (987.0 billion dollars) and UFJ Holdings 82.1 trillion yen (760.2 billion dollars) as well as a non-performing loan ration of 8.5 percent.

As a result of the merger, super lenders in Japan will be reduced from four to three, namely, the Mitsubishi Tokyo-UFJ group, Mizuho Financial Group and Sumitomo Financial Group. Inc.

The UFJ group also decided Wednesday to withdraw a proposal to sell UFJ Trust Bank to Sumitomo Trust and Banking Co.