Japan Plans to Cut Foreign Aid Budget for Sixth Year

Japan risked accusations that it is reducing its commitment to overseas development yesterday when the finance ministry ignored protests from the foreign ministry and proposed yet another cut in foreign aid in a draft for the 2005 budget.

Citing continuing fiscal constraints, the finance ministry allocated 786.2bn yen in official development assistance (ODA) in the draft, a drop of 3.8% from the current fiscal year and the sixth consecutive annual reduction. The draft is expected to receive parliamentary approval by March.

The foreign ministry is said to have demanded an end to the downward trend in ODA spending, which it regards as a crucial component of Japan's foreign policy.

There are concerns, too, that lower aid spending will harm the country's efforts to gain a permanent seat on the UN security council.

But the finance ministry is understood to have resisted the calls, insisting that no area of expenditure is safe while Japan attempts to rein in its huge national debt, expected to reach ¥774 trillion by the end of the next fiscal year. Of the total ODA spending, ¥308.7bn will cover bilateral cooperation in technology, a fall of 1% from last year. Grants in aid will fall by 3.5% to ¥208.5bn and loans to the Japan Bank for International Co-operation will fall by 6.5% to ¥174.4bn.

As in recent years, however, more money will be made available for emerging areas of concern. Funding for projects to tackle malaria and other infectious diseases will rise by 4.5% to ¥11.5bn, and ¥23.5bn - a rise of more than 2% - will go onpollution initiatives.

Despite the cuts, announced yesterday as part of a ¥82 trillion draft budget, Japan will remain the world's second largest donor after the United States. Tokyo's net spending was $8.9bn last year, against Washington's $15.7bn. The move, though, is likely to boost calls for Japan to cut aid to China, until two years ago the biggest recipient of Japanese ODA.