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Japan, responding to a U.S. request, has begun preparations to offer about $1 billion in 2004 to help rebuild Iraq, government sources said Thursday.

The sum has yet to be finalized and could swell to as much as $3 billion if Tokyo finds Washington wants more, the sources said.

Chief Cabinet Secretary Yasuo Fukuda said Japan is ready to bear its share of the cost of rebuilding Iraq.

“We intend to cooperate by considering a due share,” the top government spokesman said. He did not specify how much of the cost Japan would cover, saying the government will decide after seeing “how the international community moves.”

Prime Minister Junichiro Koizumi will make a decision taking into account a U.S. response to the envisaged sum, and plans to offer the result when President George W. Bush visits Japan on Oct. 17 for a summit, the sources said.

The Japanese government plans to then announce its contribution at an international donors’ meeting for Iraq to start Oct. 23 in Madrid, they said.

The plan is expected to stir domestic controversy, however, and it will further strain the nation’s debt-plagued fiscal conditions with a House of Representatives election expected as early as this fall.

Japan will probably provide the money through a fund jointly set up by the United Nations and the World Bank, the sources said.

The government initially considered offering less than $1 billion in grant aid as a first step, followed by several billion dollars worth of yen loans provided after an elected Iraqi government is established, the sources said.

But it changed its stance to expand the initial sum following the rise in U.S. expenses in Iraq amid the worsening security situation, they said.

On Wednesday, U.S. Ambassador Howard Baker visited Foreign Minister Yoriko Kawaguchi to discuss Japan’s financial contribution for Iraqi rehabilitation, as well as its dispatch of troops to restore security.

“It is entirely up to Japan” to decide on the form of its contribution for Iraq’s rehabilitation, “but I believe Japan is committed to full participation in the efforts to restore not only stability but rehabilitation of Iraq,” Baker told reporters after the meeting.

The Bush administration has said reconstructing Iraq could cost as much as $75 billion and is seeking congressional approval of $20 billion in emergency spending.

In a nationally televised address earlier this month, Bush called Iraq the “central front” in the U.S. war on terrorism and urged U.N. member states to expand their cooperation.

In his address, Bush named Japan, European nations and Middle East states as countries that “should contribute” to the success of freedom in Iraq and Afghanistan through funding and other forms of involvement in the U.S.-led campaign.

During the Persian Gulf War in 1991, Japan contributed $14 billion in aid to the allied forces and to nations in the region. Japan’s contributions to Afghanistan, including humanitarian aid, have totaled $900 million. In both cases, Japan shouldered about 20 percent of the total international contribution.

According to a report by the Nihon Keizai Shimbun, the U.S. estimates that other nations will have to shoulder $30 billion to $55 billion of the financial burden related to Iraq over the next several years.

If the 20 percent figure stands, Japan will pay a total of $6 billion to $11 billion of that amount over the next several years, the newspaper said in its Thursday morning edition.

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