TOKYO, Nov. 15 (Reuters) – Nippon Yusen KK, Japan's biggest shipping company, said it would raise up to $1.6 billion through a public share offering to shore up its capital base as it hastens reforms to cope with a global shipping slump.

The severe economic downturn that has reduced global trade volumes pushed Japan's all of top three shipping companies into first-half losses, forcing them to scale back their fleets and review their growth strategy.

Nippon Yusen in particular has been hit hard by bulging losses in the air cargo business. Its debt ballooned to more than double its equity by the end of September, sharply above such ratios for domestic rivals Mitsui OSK Lines Ltd. and Kawasaki Kisen Kaisha Ltd.

''Nippon Yusen needed to strengthen a capital base weakened by the air cargo business, which is seen having a huge negative net worth,'' said Osuke Itazaki, an analyst at Credit Suisse.

News of the capital raising sent the firm's shares down 4 percent to 314 yen. Shares in Mitsui OSK closed down 1.5 percent at 532 yen, and Kawasaki Kisen finished down 6.1 percent at 310 yen, as investors feared they might also tap the market for funds.

Nippon Yusen said it would raise up to 142.5 billion yen through the sale of 220 million new shares in the domestic market and 207 million in overseas markets, with Nomura Securities, Mitsubishi UFJ and Merrill Lynch servicing as co-underwriters.

It plans to issue an additional 33 million in third-party allotments to Nomura Securities, boosting its shares outstanding by 37 percent.

The payment date is set between December 8 and 10.

Nippon Yusen will be joining a rush of firms tapping resurgent equity markets for funds. Japanese companies have sold $40 billion worth of shares so far this year, an almost nine-fold increase from $4.5 billion in the same period a year earlier, according to Thomson Reuters data.

Financial institutions made up the bulk of the funds, accounting for 70 percent.