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*Japan, World Bank to set up $3 bil. fund for developing nations * WASHINGTON, Nov. 14 KYODO *Japan* and the World Bank said Friday they have agreed to launch a $3 billion fund at the global lending agency to help recapitalize embattled financial institutions in developing countries feeling the pinch amid the global financial crisis. Tokyo will contribute $2 billion and the World Bank $1 billion to the new fund, the bank said in a statement issued after Japanese Finance Minister Shoichi Nakagawa and World Bank President Robert Zoellick made the deal in talks. The contribution will be one of the main proposals Japanese Prime Minister Taro Aso is to put forward to deal with the crisis at a just-started two-day meeting of the Group of 20 developed and emerging market economies in Washington. Another of his major proposals will be Tokyo's plan to lend up to $100 billion to the International Monetary Fund so as to help crisis-hit emerging market economies. Tokyo's contribution to the new $3 billion fund would be made through the Japan Bank for International Cooperation, with the fund expected to be set up at the International Finance Corp., a World Bank group member. ''This initiative to recapitalize banks is similar to the domestic measures we are taking to stimulate the Japanese economy, especially with regard to supporting small and medium-sized enterprises,'' Nakagawa was quoted as saying in the statement. ''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,'' Zoellick was quoted as saying. The new fund aims to pump capital into banks in developing countries that may suffer as investment flows reverse due to the financial crisis, which would especially affect small and medium-sized enterprises. According to IFC projections, a fund of $3 billion would have a leveraged impact of some $75 billion as others co-invest with the fund, and the banks receiving capital would be able to lend to their clients at broader levels. A Japanese official said other countries may be contributing to the fund later. The G-20 consists of the Group of Seven major industrialized nations -- Britain, Canada, France, Germany, Italy, Japan and the United States -- plus major rising economic powers such as Brazil, China and India. Also attending the weekend summit are U.N. Secretary General Ban Ki Moon, IMF Managing Director Dominique Strauss-Kahn, Zoellick, and Mario Draghi, chairman of the Financial Stability Forum, a panel that primarily advises the G-7. ==Kyodo [Non-text portions of this message have been removed]
