Japanese Economic Cooperation

Abstract

Japanese official development assistance (ODA) totaled $9.13 billion in 1988, which put Japan neck and neck with the United States for the title of largest aid-donor country. In the few decades since joining the Development Assistance Committee in 1961, Japan has steadily increased its aid effort until the country is now one of the major sources of economic cooperation. This article first outlines the characteristics of Japanese ODA—such as its emphasis on loans to Asia—and then discusses the various factors that have shaped these characteristics. In recognition of the fact that yen credits are central to Japanese assistance, the significance and impact of those yen credits are then examined. Finally, some recent developments in Japanese assistance and some issues that remain to be resolved are reviewed.

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References

1. Because they require repayment of principal and interest, yen credits are extended mainly for infrastructure projects that yield economic benefits directly or indirectly.

2. The First Mid-Term Target (MTT) covered the years 1978-80, and its main target was to double the amount of ODA in 1980 from the 1978 level of $1.42 billion. The Second MTT covered 1981-85 and was intended to achieve a total amount of ODA for the period double that of the latter half of the 1970s. The Third MTT started in 1986 and was scheduled to run for six years and to increase ODA to more than $40 billion. This was supplanted, however, in 1988 by the Fourth MTT, which covers the years 1988-92 and is intended to make the total amount of ODA for the half-decade $50 billion, or double what it was for the previous half-decade.

3. U.S. Library of Congress, Congressional Research Service, Foreign Affairs and National Defense Division , Issues and Options in the Coordination of U.S. Foreign Aid Policy, report prepared for the Committee on Foreign Affairs, U.S. House of Representatives, May 1979, p. 7.

4. M. D. Little and J. M. Clifford , International Aid (London: George Allen & Unwin, 1965), pp. 30-37.

5. Goran Ohlin , Foreign Aid Policies Reconsidered (Paris: Organization for Economic Cooperation and Development, Feb. 1966), p. 32.

6. Japan, Ministry of Foreign Affairs, Economic Cooperation Bureau, ODA Effectiveness Group , ed., Keizai kyōryoku no rinen [Principles of economic cooperation] (Tokyo: Association for Promotion of International Cooperation, 1981), pp. 41-74.

7. Overseas Economic Cooperation Fund , ed., Kaigai Keizai Kyōryoku Kikin nijūnen-shi [Two decades with the OECF] (Tokyo, 1982), pp. 25-28.

8. Since 1975, the OECF has been the sole supplier of yen credits.

9. Commission on International Development , Partners in Development (Pearson Report) (New York: Praeger, 1969).

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10. J. Tinbergen , Preparation of Guideline and Proposals for the Second United Nations Development Decade (Report of the U.N. Committee for Development Planning) (New York: United Nations, 1970).

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11. The FILP is a governmental program to accomplish policy ends. Its main financial resources are postal savings and postal insurance. The current program was established in 1953, and it has since emphasized industrial development. In recent years, increasing percentages of FILP money have gone to home loans and other means of improving living standards.

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12. Although the terms and conditions for yen credits are currently indexed only to the recipient country's income level, study needs to be given to ways of considering external economies in setting interest rates and other conditions.

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13. The Heavily Indebted Developing Countries' Economic Policies and Japanese Economic Cooperation (Tokyo: Institute of Developing Economies, 1984), pp. 16-18.

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14. Note that there is relatively little capital flight from Korea and Thailand, both of which are relatively deregulated.

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15. The net inflow of ODA loans for the Republic of Korea in the early 1970s was equivalent to 13-14 percent of local investment.

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16. Japan, Prime Minister's Office, Public Opinion Survey on Economic Restructuring, Sept. 1988, pp. 44-45.