Japan became an aid donor in 1954 when it joined the Colombo Plan. Its aid budget at that time, essentially for technical assistance, was 18 million yen (about $50,000).4 In the same year, Japan concluded the first war reparations agreement with Burma. Other agreements followed with the Philippines, Indonesia and South Vietnam. Economic aid, not covered by formal reparations agreements, was also provided to eight other countries as compensation payments.5 In 1958 Japan’s yen loan program commenced with the first agreement to provide 18 billion yen ($50 million) to India. According to the Ministry of Foreign Affairs (MOFA) in its ‘40th Anniversary of Japan’s ODA’ essay, this marked the ‘starting point of Japan’s economic cooperation in earnest’.6
Japan’s aid program thus began as a way of ‘compensating’ for war time occupation of neighbouring countries. But it was also a tool for promoting its postwar economic recovery.7 In fact, from the late 1950s, Japan’s aid was essentially a
component of the country’s foreign economic policy, albeit a somewhat obscure
component.8 The term ‘economic cooperation’ was used to describe the overall pattem of private and government capital flows to neighbouring developing countries, including loans, export credits and private investm ent The basic orientation of economic
cooperation was to assist the Japanese economy by creating foreign markets, promoting exports, as well as securing access to raw materials.9 This rationale and approach, which represented a consensus at this time, was reflected in official reports including the
4 Japan’s technical assistance program actually began in 1952 when it contributed $80,000 to the United Nations Expanded Program o f Technical Assistance, a forerunner of the UNDP.
5 These included Thailand, Laos, Cambodia, Korea, Singapore, Malaysia, Micronesia and Mongolia. 6 MOFA, Japan’s Official Development Assistance, 1994 Summary, Tokyo, September 1994, p.2. The Export Import Bank, set up in 1952, was the main implementing agency for loans and export credits until the early 1960s. Yen loans were administered by the Southeast Asia Development Cooperation Fund, established within the Export Import Bank in 1958.
7 It has been noted that the US supported Japan’s membership of the Colombo Plan, as a way of promoting Japanese exports to the Asian region and thus the postwar recovery o f the Japan economy. W illiam S. Borden, The Pacific Alliance: The United States Foreign Economic Policy and Japanese Trade Recovery, 1947-1955, University o f W isconsin Press, 1984; cited in Shinji Takagi, From Recipient to Donor: Japan s O fficial Aid Flows, 1945 to 1990 and Beyond, Essays in International Finance, No. 196, Princeton University Press, 1995.
8 Dennis Yasutomo, ‘Why Aid? Japan as an “Aid Great Power” ’, Pacific Affairs, Vol.62, No.4, Winter 1989/90, pp.440-503.
9 This aspect o f the origins o f Japan’s aid program was noted in the first studies of Japan’s economic cooperation. See, for example, John White, Japanese Aid, Overseas Development Institute, London, 1964. A later study by Sukehiro Hasegawa, Japan’s Foreign Aid: Policy and Practice, Praeger, New York, 1975, sets aid policy within the context of Japan’s national interest (kokueki) and elaborates on the changing priorities of this national interest. It reaffirms the centrality of economic reconstruction and growth in the origins o f Japan’s aid program.
Ministry of International Trade and Industry (MITI) White Paper on Economic Cooperation and M OFA’s annual Diplomatic Blue Book.10
M ITI’s role in promoting Japan’s industrial and commercial recovery, and especially in developing foreign markets, gave it a special interest in ‘economic cooperation’. It was MITI that published the first White Paper on Economic Cooperation in 1958. The Japanese private sector also had a key role in promoting economic cooperation and was officially incorporated into the policy making sphere.* 11
The administrative structures governing aid policy took shape in the early 1960s. Aid policy was officially coordinated by the ‘four ministry and agency system’
(yonshocho), which included MITI, MOFA, the Ministry of Finance (MOF) and the
Economic Planning Agency (EPA). The Overseas Economic Cooperation Fund, (OECF), was created in I960.12 It was given responsibility for implementing yen loans, and was under the authority of the EPA. In 1962, the Overseas Technical Cooperation Agency (OTCA) was set up and given responsibility for technical cooperation. The OTCA merged in 1974 with the Japan Emigration Service (and part of the Japan Overseas Development Corporation) to become the Japan International Cooperation Agency (JICA).
In the 1960s, Japan became more integrated into the international donor community. It joined the Development Assistance Group in 1960, the forerunner of DAC. It subsequently became a member of DAC, the International Development Association (IDA) of the World Bank, and the International Monetary Fund (IMF). Japan also played a prominent role in new multilateral fora, especially the Asian
Development Bank established in 1966.13 These bodies provided Japan with a means of rebuilding its international role and forging relations with developed and developing countries.14
10 For a survey o f MOFA and MITI White Papers in the 1950s and 1960s, see Juichi Inada, ‘Japan’s ODA to ASEAN Countries: Objectives and Policymaking Process’, Development and ODA, Japan- ASEAN Forum 1, United Nations University, Tokyo, 1990, pp.50-6.
11 This aspect has been explored by David Arase, ‘Public-Private Sector Interest Coordination in Japan’s O DA’, Pacific Affairs, Vol.67, No.2, Summer 1994, pp. 171-99.
12 The OECF was created in response to concern about securing stable supplies of raw materials from developing countries. Its ‘basic intention’ was the promotion o f Japanese control over energy and raw material production in developing countries. The mechanism would be yen loans to Japanese firms carrying out projects in resource development. David Arase, ‘Public-Private Sector Interest Coordination in Japan’s O D A ’, pp.175-6.
13 On Japan’s role in the Asian Development Bank, see Dennis Yasutomo, Japan and the Asian Development Bank, Praeger Special Series, New York, 1983.
14 Japan was especially concerned about becoming a member of the OECD and ‘joining the club of advanced countries’. Membership o f DAC was instrumental in this respect. See Torn Yanagihara and Anne Emig, ‘An Overview of Japan’s Foreign A id’, in Shafiqul Islam (ed.), Yen for Development: Japanese Foreign Aid and the Politics of Burdensharing, Council on Foreign Relations, New York,
Participation in international fora also led to some clarification of the terms ‘economic cooperation’ and ‘aid’, although these continued to be used interchangeably. The distinction lay in the way ‘aid’ came to be associated with the DAC’s definition of ‘development assistance’, which was defined by MITI as ‘economic cooperation in the narrow sense’.15
In line with its membership of international donor organisations, Japan began to extend increasing amounts of grant aid in the late 1960s that were unrelated to
reparations payments. In 1968 food aid commenced. This was a form of grant aid which emerged out of the Kennedy Round of international trade negotiations. In 1969 the general grant aid program was introduced. This was officially under the jurisdiction of MOFA, with OTCA and later JICA responsible for implementation. Given its late arrival and the emphasis on yen loans, grant aid (excluding reparations) remained a relatively small part of Japan’s aid program.16
By the end of the 1960s, the term aid had come to be associated with official, or government, transfers.17 Japan’s ODA encompassed bilateral loans, grants, reparations (these continued until 1976) and technical assistance; and contributions to multilateral organisations. A number of distinguishing features of Japan’s bilateral ODA, which would prove enduring characteristics, had also emerged by this stage.