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Japan

 
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Japan

INTERNATIONAL ECONOMIC COOPERATION AND AID

Japan emerged as one of the largest aid donors in the world during the 1980s. In 1991 Japan was the second largest foreign aid donor worldwide, behind the United States. Japan's ratio of foreign aid to GNP in this year was 0.32 percent behind the 0.35 percent average for the OECD's Development Assistance Committee member countries, but ahead of the United States ratio of 0.20 percent.

The foreign aid program began in the 1960s out of the reparations payments Japan was obliged to pay to other Asian countries for war damage. The program's budget remained quite low until the late 1970s, when Japan came under increasing pressure from other industrial countries to play a larger role. During the 1980s, Japan's foreign aid budget grew quickly, despite the budget constraints imposed by the effort to reduce the fiscal deficit. From 1984 to 1991, the Official Development Assistance (ODA) budget increased at an average annual rate of 22.5 percent, reaching US$11.1 billion by 1991. Part of this rise was the result of exchange rate movements (with given yen amounts committed in the budget becoming larger dollar amounts). During the 1980s, foreign aid rose at a lower, but still strong, rate of between 4 percent and 12 percent annually in the government budget, with an average annual rate of growth from 1979 to 1988 of 8.6 percent.

Such assistance consisted of grants and loans and of support for multilateral aid organizations. In 1990 Japan allocated US$6.9 billion of its aid budget to bilateral assistance and US$2.3 billion to multilateral agencies. Of the bilateral assistance, US$3.0 billion went for grants and US$3.9 billion for concessional loans.

Japan's foreign aid program has been criticized for better serving the interests of Japanese corporations than those of developing countries. In the past, tied aid (grants or loans tied to the purchase of merchandise from Japan) was high, but untied aid expanded rapidly in the 1980s, reaching 71 percent of all aid by 1986. This share compared favorably with other Development Assistance Committee countries and with the United States corresponding figure of 54 percent. Nevertheless, complaints continued that even Japan's untied aid tended to be directed toward purchases from Japan. Aid in the form of grants (the share of aid disbursed as grants rather than as loans) was low relative to other Development Assistance Committee countries and remained so late in the 1980s.

Bilateral assistance was concentrated in the developing countries of Asia, although modest moves took place in the 1980s to expand the geographical scope of aid. In 1990 some 59.3 percent of bilateral development assistance was allocated to Asia, 11.4 percent to Africa, 10.2 percent to the Middle East, and 8.1 percent to Latin America. Asia's share was down somewhat, from 75 percent in 1975 and 70 percent in 1980, but still accounted for by far the largest share of bilateral aid. During the 1980s, increased aid went to Pakistan and Egypt, partly in response to pressure from the United States to provide such aid for strategic purposes. Japan had little involvement in Africa, but the severe drought of the 1980s brought an increase in the share of development assistance for that continent.

The five largest recipients of Japanese ODA in 1990 were in Asia: Indonesia (US$1.1 billion), China (US$832 million), Thailand (US$448.8 million), the Philippines (US$403.8 million), and Bangladesh (US$370.6 million). Earlier in the 1980s, China had been the largest single recipient for several successive years. These large aid amounts made Japan the largest single source of development assistance for most Asian countries. For the Association of Southeast Asian Nations (ASEAN--see Glossary) countries, for example, Japan supplied 55 percent of net ODA received in 1987, compared with 11 percent from the United States and only 10 percent from the multilateral aid agencies.

The largest use of Japan's bilateral aid is for economic infrastructure (transportation, communications, river development, and energy development), which accounted for 31.5 percent of the total in 1990. Smaller shares went to development of the production sector (17.1 percent) and social infrastructure (19.7 percent). In general, large construction projects predominate in Japan's bilateral foreign aid. Within the category of social infrastructure, education absorbed 6.7 percent of the bilateral aid in 1990, water supply and sanitation made up 3.4 percent, and only 2 percent went for health. Food aid (0.4 percent of total bilateral aid in 1990) and debt relief (4.3 percent) also were included in Japan's official development assistance.

Data as of January 1994


Japan - TABLE OF CONTENTS

  • Japanese - The Character and Structure of the Economy

  • Japanese International Economic Relations


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