TCI buys shares in Mizuho, Kajima in J-Power fight

TOKYO, May 27 (Reuters) - British activist investor The Children's Investment Fund (TCI) said it has taken stakes in Mizuho Financial Group (8411.T) and Kajima Corp (1812.T) to help it ratchet up pressure on J-Power (9513.T) to boost returns.

Mizuho, Japan's second-largest bank, and Kajima, a construction company, are among the largest shareholders in J-Power, an electricity wholesaler that TCI is pressuring to raise dividends and appoint outside directors.

TCI is also demanding that J-Power cut cross-shareholdings -- shares held mutually between companies to cement business ties -- because it says there is an inherent conflict of interest in the relationship and it leads to lax corporate governance.

"As a pure shareholder, our goal is to hold our companies accountable for producing good returns on all their investments including stock investments, and that they have proper governance processes," TCI director John Ho said in an email to Reuters.

Ho said that TCI had purchased shares in Mizuho and Kajima in the past couple of months, but did not reveal the size of those stakes.

Taking more than 5 percent in a company would require the fund to make its stake public to regulators.

Earlier this month, the government prevented TCI from doubling its stake in J-Power to 20 percent, the first time the state has blocked a foreign investor on national security grounds.

TCI last week launched a proxy fight aimed at getting support for its proposals, which also include a vote on whether or not to re-elect J-Power President Yoshihiko Nakagaki.

J-Power, whose official name is Electric Power Development Co, has countered in a letter to shareholders that TCI's dividend hike proposal would strip it of cash needed for vital investments and said the fund was only interested in its own short-term gains.

(Reporting by Nathan Layne; editing by Sophie Hardach)