The three largest shipping companies in Japan have signed a deal to merge operations and create the world's sixth largest box carrier.

Kawasaki Kisen Kaisha, Mitsui OSK Lines and Nippon Yusen Kabushiki Kaisha said they would create a combined company that would control 7% of the global container-shipping capacity when it begins operations in April 2018.

The three firms said they would invest ¥300bn (£2.3bn) in the venture, which is expected to deliver savings of ‎¥110bn annually.

The merger is subject to approval from regulators from around the world, including the European Union, US and China.

In a joint statement, the companies said the decision to merge was taken to counter "an environment that is adverse to container line profitability".

Shipping companies have been struggling to churn out profits due to overcapacity and a drop in demand.

In August, South Korean shipping giant Hanjin declared bankruptcy and left many of its cargo-laden vessels stranded at sea over fears that they could be seized by creditors at ports.

"In order to combat these factors, industry participants have sought to gain scale merit through mergers and acquisitions and consequently the structure of the industry is changing through consolidation," the statement read.

"Under these circumstances, three companies have now decided to integrate their respective container shipping on an equal footing to ensure future stable, efficient and competitive business operations."

Nippon Yusen will own 38% of the merged entity, while Kawasaki and Mitsui will both have 31% stake.

The joint venture will have a fleet of 256 shipping vessels at its disposal, making it the second largest shipping company in Asia behind China Cosco Shipping.

Shares of the three companies rose on the news in Tokyo.