The improved bid, which represents a 26 per cent increase from the original bid of $10.8 billion, follows the Tokyo Stock Exchange decision to allow Nikko to retain its listing.
The brokerage's share price had risen 6.2 per cent after the TSE's decision, which had the effect of strengthening the hand of the four US investment banks with shares in Nikko which had rejected Citigroup's initial offer as "undervalued".
Yoji Takeda of RBC investment told Marketwatch: "I guess [Citigroup] realized the inevitable, and that's that the situation has changed with Nikko being left on the exchange, so they have to up their bid.
"But I think this is likely to be the beginning of some back and forth between the major shareholders and Citi on pricing. The question is whether Citi has a fallback position, at what price will it walk away and if there is another potential buyer out there," he added.
Citigroup's plans to acquire the brokerage, which is the third biggest securities firm in Japan, is intended to improve the bank's tarnished public image after its partner Nikko became embroiled in an accounting scandal last year.