UFJ Holdings Inc. and Mitsubishi Tokyo Financial Group Inc. -- two of Japan's four major banking groups -- said Friday they have agreed to start merger talks, aiming to integrate their operations during the first half of fiscal 2005.

They aim to sign a basic agreement by the end of this month on a plan to merge and measures to boost UFJ's capital.

The deal would create the world's largest banking group, with 190 trillion yen in assets.