Fiscal Crunch May Force Japan To Cut Down Aid

Japan, the world's biggest aid donor, yesterday signalled that budgetary constraints at home may make it less generous with aid to poor nations.

In a speech to the 30th annual meeting of the Asian Development Bank, Japanese finance minister Hiroshi Mitsuzuka bluntly stated Japan was no longer the richest of the world's rich nations.

Since our fiscal situation is the worst among industrial countries, fiscal reform is among our top priorities, Mitsuzuka told the meeting's opening session.

He said Japan in recent years had a proud record of giving the most development aid of any industrialised nation, particularly to Asia, despite enormous fiscal pressures at home.

But aid was now under threat because Japan's own economy needed massive amounts spent on restructuring to make Tokyo competitive in the world once more. When implementing fiscal structural reforms, however, official development aid (ODA) cannot be exempted from our effort to cut down on expenditure, Mitsuzuka said.

The Japanese economy has been in a slump since its asset bubble burst in 1990. It has struggled to find a recover path and a way through the burden of massive bank debts.

Since 1991, Japan has topped the list of donor countries in terms of money spent, although it has fallen back in the rankings of aid as a percentage of gross national product.

Mitsuzuka's message was one the ADB feared it would hear and added to the existing donor fatigue in the 56-member group that provides development assistance to the Asia-Pacific region.