Prime Minister Taro Aso will make the proposal at the global financial summit that will take place among leaders of the Group of 20 industrialised and emerging nations starting on Friday in Washington, the source told Reuters, confirming a media report.

The Nikkei business daily reported in its Thursday edition that Mr Aso would float such a proposal at the summit but that the government still needed to discuss how to contribute those funds.

For example, selling US government bonds held by Japan in order to provide the funds in cash would affect US bond yields.

Tokyo may therefore consider lending US government bonds to the IMF, which the institution can then use as collateral to raise funds, the newspaper added.

Tokyo announced last month that it was ready to tap its massive foreign reserves if the IMF were to require additional resources to help countries facing financial meltdown. At the time, officials did not provide any further details.

Finance ministry officials told Reuters over the past few weeks that Japan had not acted on its offer as the IMF still had sufficient funds and had not asked for help.

Japan has said the IMF should improve its surveillance over financial markets as well as its early warning capabilities. But it remains cautious about giving the Washington-based lender a regulatory role. -- REUTERS