Japan's banking sector is back in the global financial race following the broad alliance of three of the country's biggest banks.

The Japanese Finance Minister Mr Kiichi Miyazawa said on a Sunday television programme that the alliance means a re-emergence of Japanese banks on the world stage and could herald further mergers.

"In the late 1980s, global banks meant Japanese banks. But then they became sluggish and the butt of world ridicule," Mr Miyazawa said.

"(But with this alliance), signs have emerged that two or three Japanese banks can act on an international stage," he added.

On Friday, Japan's Dai-Ichi Kangyo Bank Ltd (DKB), Fuji Bank Ltd and Industrial Bank of Japan (IBJ) said they will form a joint holding company by the autumn of next year and integrate their business operations by the spring of 2002.

The move will create the world's first trillion dollar financial institution and. The question remains if the new world of mega-mergers in the sector can break free of the mountains of bad debt, bloated operations and low profitability that are plaguing the present world of Japanese banking.

The combined group will have assets totalling $1.3 trillion, easily surpassing the current world banking leader Deutsche Bank AG, with assets of $735 billion.