WASHINGTON - Japan agreed to invest two billion dollars in a new World Bank fund to help recapitalise banks in smaller emerging markets, the World Bank and Japan announced Friday.

The announcement followed a meeting Friday between Japanese Finance Minister Shoichi Nakagawa and World Bank president Robert Zoellick as world leaders gathered in Washington for a Group of 20 summit of rich and emerging economies.

Japan's contribution would be the first to the fund, which was announced this week by Zoellick as part of a World Bank response to the global financial crisis battering economies.

"Japan's investment is a sign of the strong partnership between Japan and the World Bank Group. The contribution would be made through the Japan Bank for International Cooperation (JBIC) and would mark the successful launch of the fund," the World Bank and Japan said in the joint statement.

Nakagawa said the step "further strengthens" the relationship between the Japanese government and the World Bank, as well as the Japan Bank for International Cooperation (JBIC) and the International Finance Corporation (IFC), the private-sector financing arm of the World Bank.

The fund is subject to the approvals of both IFC and JBIC boards.

The IFC already has committed one billion dollars to the fund.

"I am delighted to be able to announce Japan's contribution for this fund, which I believe will help significantly in shoring up banks in poor countries and will ultimately protect the poorest from the impact of the global financial crisis," said Zoellick.

"We very much value the strong partnership between Japan and the World Bank Group and hope other countries will follow Japan's leadership in making such a significant contribution."

The Japanese government announced earlier Friday that it would offer to lend up to 100 billion dollars to the International Monetary Fund to help provide financial lifelines to crisis-hit emerging countries.

At almost 980 billion dollars, Japan has the second-largest foreign exchange reserves in the world, after China.

US President George W. Bush was to host world leaders at a working dinner at the White House Friday, followed by formal talks on Saturday.

- AFP /ls