New York-based Cerberus Capital Management LP, one of the world's largest private equity firms, plans to drastically reduce its stake in Japanese mid-sized lender Aozora Bank Ltd -- formerly known as Nippon Credit Bank. Cerberus will sell $1.7 billion (148 billion yen) worth of shares of Aozora, bringing down its stake in the bank from 58 percent to 7.7 percent.

The insync with investment firm's strategy to reduce its exposure to Japan. Reports say Cerberus is also planning to sell its holdings in Seibu Holdings, an operator of railways, resort hotels and real estate properties in Japan.

Cerberus has not make an official statement on this move but will reportedly sell 275 million shares in Japan and another 275 million shares in overseas markets. The PE fund may also sell up to 41.25 million additional shares depending on the demand.

The PE fund's move is apparently influenced by a surge in Tokyo stock market, triggered by rising investor expectation that the new Japanese government will take strong measures to counter the domestic economic woes. Cerberus expected to profit from this uptrend.

Pertinent to note that Cerberus purchased a minority stake in Aozora in 2000 and became its biggest shareholder in 2003 when Softbank Corp sold its 48.87 percent share to the fund for 101 billion yen.

According to a filing, Citigroup Inc, along with Morgan Stanley MUFG Securities Co, a joint venture between Morgan Stanley and Mitsubishi UFJ Financial Group, will serve as joint global coordinators of the sale. Other banks involved in the sale are Goldman Sachs Group Inc, Barclays PLC, and Daiwa Securities Group Inc.