Mitsubishi UFJ Financial Group Inc <8306.T> is likely to take a 60 percent interest in the venture it is forming with Morgan Stanley
The two will announce the merger of the brokerage units as early as this week, the paper said.
MUFG, Japan's biggest bank, said in a statement that no agreement between the two had yet been reached and they were still in talks over possible global alliance.
A spokesman at Morgan Stanley in Tokyo declined to comment.
The merged Mitsubishi UFJ Securities Co and Morgan Stanley Japan Securities Co would become the third-largest securities firm in Japan.
Mitsubishi UFJ provided Morgan Stanley with $9 billion in capital last autumn. The two banks agreed to pursue a strategic alliance spanning a range of businesses, from retail banking and wealth management to capital markets.
(Reporting by Gerald E. McCormick in New York and Taiga Uranaka in Tokyo; Editing by Michael Watson)