The 40-year yen loan will be provided via the state-funded Japan Bank for International Cooperation, the ministry said.
Of the loan, 50 billion yen will be used to finance the construction of a pipeline to export oil from the southern Iraqi city of Basra, it said.
The remaining 32.6 billion yen will be used to improve power transmission facilities, the ministry said.
The loan is intended for the reconstruction of Iraq's destroyed infrastructure and oil industry, which earn foreign currency through exports, ministry officials said.
The loan is part of a financial assistance plan for Iraq announced by Japan in 2003.
Under the plan, the Japanese government will provide a total of $5 billion (580 billion yen) to Iraq -- $1.5 billion in grant aid and $3.5 billion in loans -- between 2004 and 2007.
Copyright 2006 Kyodo News.
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