Japan said on Tuesday that Group of Seven finance leaders will discuss this week the transparency of government investment funds.

Often dubbed sovereign wealth funds, they have recently grown in number and size as central banks in Middle East countries and nations with huge reserves seek higher returns by investing in riskier assets.

China's recent move to set up its fund, China Investment Corp, to manage part of its stockpile of foreign reserves in search of higher returns has caught market attention as it has the potential to grow into one of the world's biggest funds.

"I expect the G7 to discuss how those sovereign funds are different from private funds in terms of transparency to the market," Finance Minister Fukushiro Nukaga told a news conference.

"It is hard to know what they really do, so I think there will be various opinions about them (at the G7)," Nukaga said.

Finance ministers and central bank governors from Group of Seven industrialised nations -- from Britain, Canada, France, Germany, Italy, Japan and the United States -- will meet on Friday in Washington.

Japan wants more transparency in the operating principles and asset composition of those funds, while a European Union official said last week the group would study their activity but had no plan to curb them.

 The US Treasury has called on the International Monetary Fund and the World Bank to develop a best-practice guide for fast-growing sovereign wealth funds, saying their growth poses risks to financial market stability.

Nukaga said that although recent market turbulence triggered by US subprime mortgage woes had settled somewhat, it was still necessary to monitor market and economic conditions to gauge any impact on the real economy.

Asked what he would like to discuss at his first G7 meeting as finance minister, Nukaga said, "Orderly movements in financial markets and currencies are important for achieving stable economic growth. Thus it is important to focus our discussions on that." -Reuters