JAPAN: As Domestic Needs Grow, Overseas Aid Takes Back Seat

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Aug 12 1997 (IPS) - Japan’s shrinking foreign aid budget reflects the economic woes nagging the world’s largest aid donor, but it also signals a gradual shift in its foreign policy which is anchored on official development assistance (ODA).

“ODA represents a pillar of Japan’s foreign policy because it is Japan’s only contribution to the world. There is a move among some conservative thinkers to reduce Japan’s dependence on ODA alone and expand its international relations on par with other big powers,” explained Yu Tanaka, of Forum 2001, a citizen’s group that conducts research on development aid.

Japan spent an equivalent of 9.6 billion dollars in ODA in 1996, or about 35 percent lower than the previous year’s outlay. For 1998, the projected aid budget shows a 10 per cent cut from current levels.

Dependent on other countries for natural resources, Japan, the world’s largest exporter, has used its overseas assistance to soften international criticism of its huge trade surplus.

In 1991 Japan ranked number one among international donors and has since maintained this standing. Budgetary appropriations for ODA had grown by up to six percent a year, the only sector besides defence that was beyond the reach of budget-slashers.

Last year for the first time there was a dramatic drop in Japan’s dollar donations, a factor attributed to a slow slide in the Japanese yen to the US dollar from around 100 yen to the dollar to around 112 yen.

But it was the limping economy — a growth of one to three percent during the past few years — that was causing a dent in Japan’s huge trade surplus. Development aid was not the only budget to be slashed, as cuts were also made in many ministries, including defence, whose budget dipped two percent in 1996.

The ODA budget accounts for 2.7 percent of the fiscal 1997 budget. Defense and public-works expenditure accounts for 11.3 percent and 19.7 percent approximately.

Yen loans comprise the largest component of Japanese aid. Indonesia is the largest recipient of Japanese aid, followed by China.

Prime Minister Ryutaro Hashimoto has appointed a committee of officials and politicians to re-examine Japan’s ODA budget and policies in light of the new austerity moves implemented by his government.

The Committee has recommended more cuts starting 1998 through fiscal 2000 that ends in April 2001. Politicians in the group, according to the Japanese media, have been voicing their dissatisfaction over the preferential treatment given ODA.

Some say that voters are unhappy about having to pay a higher consumption tax only to see their money being spent abroad.

Japan’s consumption tax was hiked to five percent in April from 3.0 percent causing resentment among the public. The fiscal 1998 budget, according to an announcement by Hashimoto, will avoid any long-term projects that require budgetary spending.

The current five-year target of 70 billion to 75 billion dollars ends in fiscal 1997.

The cuts in overseas assistance has, ironically, not raised too much resistance among the public or experts dealing with Japan’s most important international contribution.

Professor Terumasa Nakanishi of Kyoto University, an international relations expert, in an interview with local journalists stressed the need for Japan to develop new ideas towards its global commitments.

“What is more important is the kind of defense power and diplomatic strategies we have . The financial elements should proceed afterward,” he said.

Nakanishi’s views represent a growing call here that points out the need for Japan to become an international player that can influence world politics independent of the United States.

“Foreign governments give a harsh score to the Japanese government because it always follows U.S. decisions on important international issues,” says Nakanishi. “Maybe Japan can finally strive to become a diplomatic power now that it has no money.”

The slash in the budget has been welcomed by non-governmental organizations and activists though for a completely different reason. “Japanese aid was based on lending rather than helping the poor which encouraged more countries to be heavily indebted to Japan,” explained Tanaka. “On these terms the slash is very welcome.”

Grassroots organizations hope the aid budget will be re-examined and made into a commitment that is extended through grants and techincal assistance that will fund self-help projects, health and education.

“In this way a slash may actually work for the better,” says Tanaka.