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ECONOMY-JAPAN: Meltdown Prompts ODA Boost To Asia

Catherine Makino

TOKYO, Jan 31 2009 (IPS) - Japanese Prime Minister Taro Aso told the World Economic Forum (WEF) at the Swiss mountain resort of Davos on Saturday that Japan will provide 17 billion US dollars worth of aid to stimulate Asia’s economies.

Aso said in a televised speech that the package from the world’s second largest economy would be provided as Official Development Assistance (ODA) for meeting challenges posed by the global economic crisis.

The offer represents a 20 percent increase in ODA to be implemented over a three-year period. Japan had slipped to fifth place from being the number one provider of overseas aid after former prime minister Junichiro Koizumi set in motion a plan in 2006 to reduce foreign aid by 2 – 4 percent every year until the budget was balanced by 2011.

Aso’s announcement augments other proposed measures that include an economic stimulus package of two percent of Japan’s GDP, a proposed loan of 100 billion dollars to the International Monetary Fund and the establishment of a fund to recapitalise banks in developing countries and reform internal financial institutions.

Aso ended his speech with one of his favourite quotes from the French philospher Alain, “Pessimism comes from our passions, optimism from the will.”

Japan has a major role to play in world affairs at this critical moment, said Osamu Sakashita, deputy cabinet secretary for public relations, at a briefing in Tokyo on Friday.

Politicians rather than bankers are taking centre stage this year at Davos (Jan. 28 – Feb. 1), according to Sakashita. The theme of the meet ‘Shaping the Post-Crisis World’ where the world’s economy, poverty, climate change, and financial business are being discussed is revealing enough, according to him.

The promised funds, Sakashita said later in an e-mail communication, will be disbursed “as expeditiously as possible”. Details of the package will be decided at the East Asia Summit in Chiang Mai, Thailand, later this year.

The Forum, a non-profit foundation based in Geneva, meets every year. About 2,500 people from 91 countries, including the world’s top politicians, business and religious leaders, celebrities and academics gather to attend discussions, workshops and lectures to produce research reports and specific initiatives.

Aso’s offer or the Davos meet itself is of limited interest this year say academics IPS spoke with in Tokyo.

“To be frank, I think there’s very little significance to Davos or Aso’s participation there,” Weston Konishi, adjunct fellow at the Mansfield Foundation in Washington D.C., told IPS in an interview. “Generally, nothing of any concrete policy consequence comes out of the Davos meetings. This year, I think it will be particularly flat.”

According to Konishi, the corporate elites are somewhat discredited as the gurus of the global economy and there is little appetite right now for the idea of the jet-set crowd gathering for exclusive meetings in Switzerland to discuss global affairs.

“Excuse the pessimism but I doubt there will be much to report on, especially with a prime minister whose approval ratings are about as low as they go,” Weston told IPS referring to the fact that Aso’s approval rating is 19 percent, down from 22 percent in November and 48 percent in late September when he took office.

In a bid to shore up popularity, the ruling Liberal Democratic Party (LDP) and its partner, the New Komeito, had pushed through this week a ‘stimulus budget’ that includes a plan to spread out to the public two trillion yen (22 billion dollars).

While Aso has resisted holding snap polls, Opposition leader Ichiro Ozawa said on Saturday that he expects general elections to be held in April. “We are preparing for the general election as we believe it will be held in April,” he said at a conference in the capital. Elections are due in September.

Stephen Church, an economist and research partner with ‘Japan Invest KK’ in Tokyo, says that Aso is keen to raise his approval ratings at this point. “In Japan you’re considered ‘dead in the water’ if your approval rating is lower than 20 percent and he has, so far, failed to appeal to the Japanese public.”

Even if he does shine at Davos with the stimulus package, it is unlikely to improve his popularity at home. “It is an absolute impossibility because he has made such a hash of things,” Church told IPS.

The nation’s deepening recession is spreading from manufacturers to retailers. Household spending dropped for the tenth straight month to 4.6 percent in December.

Major corporations like Toshiba, Sony, Toyota, and the electronics giant NEC are posting losses. In fact, on Friday, NEC said it plans to cut 20,000 workers worldwide -about half of them in Japan – according to the ministry of internal affairs. Other companies are also cutting jobs.

Unemployment rose in December to 4.4 percent from 3.9 percent in November, representing the biggest increase in almost 42 years, making 2.7 million out of work.

Sei Mori, a medium-sized Japanese manufacturer, says although he understands that the downturn is happening in the rest of the world, he is not happy with Aso. “He needs to have good ministers and staff around him, so things can move forward.”

However, Mori does not resent the increase in ODA that Aso announced in Davos.

“It’s a slow investment and we’ve been doing it for years,” Mori says. “Americans go in and expect to see the bottom line right away, whereas we are more patient. In the long term the people in these countries learn to trust us and do business with us. The big companies develop more human relations.”

However, Mori also wondered why Aso had to fly off to Davos when there was a crisis at home.

Aso was reported to have had meetings with British Prime Minister Gordon Brown and Danish Premier Anders Fogh Rasmussen. He also ate sushi at a lunch honouring him in the mountains. He returns to Tokyo on Sunday.

Not much else is happening at Davos that is cause for excitement in the Japanese capital.

According to Jeffrey Kingston of Temple University nobody here really expected much from Davos. It is a place to network and be seen and exchange ideas and views but not a place where the world’s problems get solved.

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