Japan’s megabanks embarked on a year-end fundraising spree that will spill over into 2009, despite spending much of 2008 seeming to enjoy excess capital reserves as they invested billions of dollars in foreign financial institutions. Deteriorating conditions in domestic stock markets, to which Japan’s top banks are heavily exposed, and the poor banking environment in general, mean that they are seeking to shore up their capital positions. The optimistic outlook is that the banks are raising funds in anticipation of high demand for loans in the new year. Sumitomo Mitsui Financial Group’s $5.8 billion preferred share issuance priced on December 11 was the largest deal of that kind from Japan ever, with the firm aiming to raise further funds in January. Three days earlier, on December 8, Mitsubishi UFJ Financial Group, the country’s largest banking group by assets, priced a ¥417 billion ($4.5 billion) common equity offering at a 3% discount to the share price. The group’s share price was the worst performing among Japan’s top three banks during the run-up to the deal’s pricing but the stock has since recovered.