By Makiko Yamazaki

TOKYO (Reuters) -Mitsubishi UFJ Financial Group (MUFG) said on Thursday it would invest $936 million in U.S. Bancorp - a move that will help the U.S. regional bank pay back some of the debt it owes the Japanese lender.

In return, MUFG's stake in the fifth largest U.S. bank will rise to 4.4% from 2.9%.

MUFG sold its U.S. retail banking unit MUFG Union Bank to U.S. Bancorp for $8 billion last year. As part of the deal, U.S. Bancorp received $3.5 billion in additional cash held by MUFG Union Bank which it is required to repay within five years.

The latest agreement will see U.S. Bancorp will issue 24 million common shares at $39.00 each to MUFG, compared with Wednesday's closing price of $38.43.

The Minneapolis-based bank will also help MUFG with U.S. dollar liquidity support, allowing the Japanese bank to diversify dollar funding sources in case of contingencies.

MUFG said the banks expect to further expand collaboration in areas such as corporate transactions and financial services for Japanese customers.

(Reporting by Makiko Yamazaki; Editing by Muralikumar Anantharaman and Edwina Gibbs)