Japan's largest bank, Mitsubishi UFJ, is poised to pay at least $8.4billion (£4.5billion) for a significant stake in Morgan Stanley, the American investment bank.

The deal, announced late last night in Tokyo, was the second struck within 24 hours in which a leading Japanese financial name has swooped on the troubled titans of Wall Street, after Nomura's selection as preferred bidder for much of Lehman's London business.

Mitsubishi UFJ's deal is expected to leave the Japanese bank with a stake of about 20 per cent in Morgan Stanley and is likely to lead to at least one director of the Japanese house joining the American investment bank's board.

Mitsubishi UFJ is expected to decide on the exact price it will pay - on a per-share basis - for the stake once it has completed a process of due diligence, which will begin shortly. It is thought to be at about $31.25. Morgan Stanley's battered stock slipped a further 12 cents to $27.09 yesterday.

The acquisition comes after a period of unparalleled turmoil for the investment banking industry. Doubts have been raised about the credibility of the industry's leveraged business model, sending its shares tumbling and leaving Morgan Stanley and Goldman Sachs fighting for their survival as the last big independent investment banks left on Wall Street.

In a further historic change to the industry, the Federal Reserve approved requests by both firms to be granted full banking licences, bringing an end to their distinction as pure investment banks.

The licence change will allow them more permanent access to federal funding facilities, but it put Morgan Stanley's talks about a tie-up with Wachovia, the US retail bank, on “indefinite hold”.

However, it is understood that representatives of CIC, the Chinese investment group holding nearly 10 per cent of Morgan Stanley, are in New York and are continuing to discuss the bank's capital position.

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