MML refused to divulge the terms of the deal, but it is understood that Hakuhodo has bought shares in the agency.
The current management team at MML, headed by the founding partner and chief executive, Nick Mustoe, will retain a majority share in the agency and will continue to run it on a day-to-day basis.
However, its team will be boosted by Hakuhodo London's managing director, Ryoichi Katsui, who joins MML as a director. The agency, which will incorporate Hakuhodo London's remaining two account and three creative staffers, will trade under the new name of Mustoes.
Hakuhodo's corporate executive officer, Tomokazu Jimbo, said the deal represented an important move into Europe. "Mustoes will be the key London agency for Hakuhodo, and will be another huge point of leverage to provide our clients who carry out business in Europe with a unique synergy of two cultures. British clients will also have access to our extensive network around the world."
Mustoe added: "Our collaboration with Hakuhodo will enable us to preserve how we are, while at the same time giving us worldwide coverage."
Separately, Hakuhodo has created a new $1.2 billion advertising holding company that will unite three privately held agencies - Hakuhodo itself, Daiko (Japan's number four agency) and Yomiko (the number eight agency). An eventual public stock offering is planned.