Tokyo  - Japan agreed to provide 2 billion dollars to launch a fund with the World Bank to help recapitalize struggling financial institutions, especially in developing nations.

The World Bank was expected to contribute 1 billion dollars to the fund, according to a statement released Friday at the Group of 20 (G20) summit in Washington.

The leaders of 20 developed and emerging economies gathered in Washington for a two-day summit to discuss ways to address the global financial crisis.

"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," Japanese Finance Minister Shoichi Nakagawa said in the statement.

Ahead of the summit, Japanese Prime Minister Taro Aso called for increasing the capital base of the International Monetary Fund (IMF) to 640 billion dollars from the current 320 billion dollars, Japanese media reports said.

Aso said Japan was to lend up to 100 billion dollars as part of an effort boost the IMF capital so that it could extend help to emerging economies.

An internationally coordinated fiscal and monetary policy was necessary to combat the ongoing financial crisis, Aso was quoted as telling the British Prime Minister Gordon Brown at summit, which was called as world stock markets fell dramatically, credit has dried up and the global economy has taken a sharp downturn.

They agreed that the IMF's functions should be strengthened so it could provide early warnings about financial disruptions. (dpa)