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WASHINGTON, Nov 14 (Reuters) - Japan will invest $2 billion in a World Bank fund to recapitalize banks in smaller emerging markets, the World Bank said on Friday.
"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," said World Bank President Robert Zoellick in a statement.
The World Bank said the new fund would inject capital into banks in smaller emerging markets suffering as investment flows decline in the wake of the global financial crisis, sparked by the collapse of the U.S. housing market last year.
IFC, the private lending arm of the World Bank, will add a further $1 billion of its own money to the fund, substantially boosting the potential impact of the finance.
"IFC estimates that a fund of $3 billion would have a leveraged impact of around $75 billion as others co-invest with the fund, and the banks receiving capital would be able to lend to their clients at greater levels," the World Bank said.
The contribution would be made through the Japan Bank for International Cooperation (JBIC)
Japan, which had to learn its lesson the hard way from its prolonged response to tackling its own financial crisis in the 1990s, believes its experience, including injecting public funds into battered banks, could be a useful guide to tackling the current 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. (Reporting by Alister Bull; Additional reporting by Yoko Nishikawa; Editing by James Dalgleish)