Japan has pledged $100m (£55m) to the Palestinians to help to establish peace in the Middle East.
Mr Abbas urged Mr Koizumi to play a greater political role
Japanese Prime Minister Junichiro Koizumi announced the gift in Tokyo during a visit by Palestinian leader Mahmoud Abbas.
Mr Abbas thanked Japan for its support, and urged Tokyo to take on a greater political role in the Middle East.
Mr Koizumi has offered to host a three-way summit involving Mr Abbas and Israeli Prime Minister Ariel Sharon.
The Japanese leader said the money would help finance the Palestinian administration after Israel's scheduled disengagement from the Gaza Strip.
"Considering the withdrawal from the Gaza Strip, I announce assistance totalling $100m for now," he said.
He did not say if the funding depended on the withdrawal taking place.
Japan is one of the biggest supporters of the Palestinian Authority - committing a total of $860m since the Oslo peace accords were signed in 1993.
Its offering to play a bigger role in the peace process is seen by some as part of its campaign for greater world influence and a permanent seat on the United Nations Security Council.
"What Japan can do is limited but our country would like to play a role as a member of the international community," Mr Koizumi said.
Mr Abbas backed Japan's UN aspirations.
Mr Koizumi held out hope for a summit in Japan.
"Today Mr Abbas told me that he would be pleased to have the occasion to meet with Mr Sharon in Tokyo," he said.
The Palestinian leader is now due to visit China.