Japanese foreign aid Essay Example for Free

Japanese foreign aid Essay Japan was the highest donor country in the mid 1990s. The rise to this status was gradual, spanning over 40 years. What began as a compulsion as an after effect of the Second World War, became an important tool of the foreign policy of Japan. It was under the US pressure that Japan began giving financial aid to the poorer countries. The amount kept on rising, to reach its peak in mid 90s. This was followed by a steep decline in the total amount disbursed as foreign aid. The decline was very steep. There may have been many reasons that can be attributed to the cause of this decline. However, one of the main reasons was the increasing fiscal deficit in its own budget. The economy of Japan, did not maintain as picture as rosy as it was during the mid 90s. In this context, the following two visuals are worth looking at. Figure 1. Japanese foreign aid (Cooray N. S. and Shahiduzzaman Mohd. , table 2, page 8) Fig. 2 Fiscal situation of Japan (current Japanese fiscal condition ) These charts indicate that the fiscal situation of Japan has been deteriorating since the mid 90s, at a constant rate. The issuance of deficit bonds, has been comparatively much higher than in any of the earlier years. A direct implication of this fact is that the government has been requiring more and more money to cover up its fiscal deficit. This amount is raised by issuing bonds. This condition has compelled Japan to reduce the foreign aid every successive year. No sooner Japan reached its position as the highest donor, it has been losing its position. The rapid downfall of Japan as a donor country is indeed a interesting study, and the fact that there is hardly any research done on the effect of fiscal position on the foreign aid, makes this topic even more interesting. This paper intends to make an in depth study of the fiscal situation which compelled Japan to reduce its foreign aid. It analyzes the major governing factors of the economy of Japan since the late 90s. The quickness with which Japan lost its status as the highest donor, is bound to be a good case study for other donor countries also. This study reveals that Japan has a glorious economic past. Despite the aftermath of the World War II, it had a sound economy witnessing a GDP growth nearing to 15% in the 50s, 60s and 70s. This enabled a freehand distribution of foreign aid. However, the sorry state of fiscal affairs of Japan, have compelled her to lost its status as the highest donor country. This paper in the first section briefly looks into a research paper on this subject. It tells about the history of Japanese foreign aid and discusses few important characteristics of Japanese aid. This includes the features of aid, the shift in policies and the central importance of China as a top priority receiving nation, of this aid. In the second section, details about how the fiscal situation of Japan has affected the reduction in foreign aid will be demonstrated. The third and the final section will deal with an analysis of the study. History and Characteristics Japanese foreign aid A research paper published by Marie Soderberg, associate professor, at Stockholm school of Economics, provides a good insight into the various aspects of Japanese foreign aid. The history of Japanese foreign aid begins in the 1950s as a result of war reparations agreement with Burma, Philippines and Indonesia were signed. This agreement and the subsequent aid granted by the Exim Bank were tied up with purchase from Japanese firms and very well served the interests of Japan. So far, Asian countries were the major recipients of the Japanese aid. The oil crisis of the 70s, saw the Arab nations also getting a fair share of the foreign aid from Japan. The late 1970s saw a huge rise in the foreign aid amount of Japan. This was partially a result of Japan’s wish to be respected by the international community.