MUFG says no plans to back out on Morgan Stanley

TOKYO (Reuters) - Mitsubishi UFJ Financial Group (8306.T), Japan's top bank, said it has no plans to back out of its $9 billion investment in Morgan Stanley (MS.N), even as the global market sell-off has sent shares of the U.S. firm sharply lower.

The U.S. Federal Reserve has granted regulatory approval to Mitsubishi UFJ's bid to take one fifth of the U.S. bank, although that failed to calm jittery investors who sent Morgan Stanley's shares down 25 percent.

"There is no truth to the rumors that we will pull out of our agreement with Morgan Stanley," a spokesman for the Japanese bank said.

Mitsubishi UFJ, which has largely avoided heavy subprime losses, is making an aggressive push into the United States by capitalizing on the credit crisis that has torn through Wall Street.

The bank is betting that long-term expansion in the world's largest economy will help offset the souring outlook for growth in its shrinking home market.

Given the turmoil in financial markets, the fall in Morgan Stanley's stock price was not a big surprise, said Hironari Nozaki, bank analyst at Nikko Citigroup in Tokyo.

"There is no change in my view that I see this investment as a positive. The tie up will complement the development of MUFG's weakness, global investment banking."

Mitsubishi UFJ is also spending $3.5 billion to take full control of California regional bank UnionBanCal Corp UB.N.

(Reporting by David Dolan and Junko Fujita; Editing by Rodney Joyce)