JAPAN: Tight Fiscal Conditions Temper Donor’s Generosity

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Dec 31 1994 (IPS) - The world’s most generous aid donor has just posted its lowest increase in overseas development assistance (ODA) in history, but development experts say this should not be a cause for alarm.

On Sunday, the Japanese government approved a 1.106 trillion yen (about 11.3 billion dollars) ODA budget for fiscal year 1995, representing an increase of four percent over the current year. This is the lowest rise yet in Japanese ODA since 1976, when Tokyo first began allocating funds for foreign aid.

The low growth in ODA is mainly due to the austerity of next year’s fiscal budget.

The Finance Ministry explained that while it supports the promotion of Japan’s international contributions, tight fiscal conditions and the need to address domestic financial demands, has made it impossible to follow previous rises.

An official also says Japan has reached a “high level” of foreign aid. He notes, “There are limits to the recipient countries’ capability to absorb a large amount of aid.”

Despite the austere look for the new year, Japanese ODA experts say recipient countries should not fret too much.

“Japan’s ODA budget is still the nation’s most important foreign policy,” says academic Ryokichi Hirono, who advises the Japanese government. “The recent comparative decline is natural given the tight monetary constraints in the domestic budget.”

The yen’s high exchange rate — set for 1995 at 98 yen to a dollar — also means Japan remains the world’s top donor despite the minimal increase in the aid budget.

The Japanese public opinion is totally behind using ODA to fulfill Japan’s international responsibilities, says Hirono and adds: “The government is therefore under pressure to keep up its prominent ODA profile.”

Earlier, the Finance Ministry had said it was prepared to increase the ODA budget by only 3.2 percent.

“This is a gravely tight allocation,” a Foreign Ministry official told reporters here last week. “We will try hard to increase the amount since ODA is the main pillar of Japan’s contribution to the world.”

The Foreign Ministry had wanted a 7.8 percent increase in ODA spending, claiming a high growth rate must be maintained for Japan to meet its five-year ODA budget for fiscal 1993-1997. Last year, Japan increased its ODA budget 4.8 percent.