- Japan’s net official development assistance (ODA) stood at US$10.4 billion in 2016 (in current prices). This represents 0.20% of Japan’s gross national income (GNI). Japan is the 4th-largest donor country overall, and the largest in Asia.
- Japan’s net ODA in fiscal year (FY) 2018 (April 2018-March 2019) is estimated to increase by 5% compared to FY2017. This includes an increase in the ODA budget of the Ministry of Foreign Affairs of 0.7%.
- The government has identified promoting economic growth and using ODA to engage Japanese companies in emerging markets as priorities in its development policy framework document, the Development Cooperation Charter.
- Infrastructure is a key sector of Japan’s bilateral development assistance, particularly in the form of loans for middle-income countries in Asia. Japan will likely maintain this focus in coming years.
- The Japanese government will participate in the United Nations (UN) High-level Political Forum on Sustainable Development and the Sustainable Development Goals (SDGs) in July 2018 in New York. As cabinet members are expected to attend, this event provides an opportunity to take a closer look at Japan's development policy and to advocate for increases in ODA spending in the coming years.
- The Ministry of Foreign Affairs has sought to introduce an International Solidarity Levy in Budget FY2018 to generate extra-budgetary resources to maintain ODA levels in Japan’s difficult budget environment. This process provides an opportunity to use the debate around this initiative to advocate for the need to keep ODA at a high level.
- The United Nations General Assembly (UNGA) High Level Meeting on Universal Health Coverage (UHC) will be held in 2019. Japan may be involved in setting up a committee for this event, as it did for the December 2017 UHC Forum held in Tokyo.
- The seventh Tokyo International Conference on African Development (TICAD VII) will be held in Yokohama in 2019. The conference offers an opportunity to foster dialogue with African nations and promote aid and investment.
the big six
- How much ODA does Japan provide?
Japan is the largest donor in Asia
Japan’s net ODA stood at US$10.4 billion in 2016 (in 2016 prices), making it the fourth-largest donor country within the Organisation for Economic Co-operation and Development’s (OECD’s) Development Assistance Committee (DAC). It is the largest donor in Asia. Between 2015 and 2016, net ODA increased by 1.4% due to a rise in bilateral ODA to low-income countries, largely in sub-Saharan African. In 2016, Japan spent 0.20% of its GNI on ODA, making it only the 20th-largest DAC donor relative to its GNI. Japan’s ODA temporarily peaked in 2013 (see figure), due to US$2.1 billion in debt relief and bilateral loans to Myanmar.
Current estimates of Japan’s total ODA in FY2017 (April 2017 to March 2018) are ¥1.37 trillion (US$12.6 billion). The FY2018 budget, approved in December 2017, includes net ODA of ¥1.44 trillion (US$13.3 billion). This is an increase of 5% in net ODA-related spending compared to FY2017.
Japan’s net ODA was US$10.4 billion in 2016, making it the fourth-largest donor country within the OECD DAC
The OECD is expected to start using a new reporting system for ODA in 2018 whereby loan repayments will no longer be subtracted from total ODA numbers, i.e., only the ‘grant element’ of loans will be reported as ODA. For Japan, large loan repayments currently account for the significant difference between gross and net ODA (see figure). The reform is thus expected to have a large impact on Japan’s ODA levels. As Japan’s loans are highly concessional, Japan’s total ODA levels are expected to significantly increase.
- What are Japan’s strategic priorities?
Japan focuses its ODA on Asia; support is increasing for economic development and Africa
Japan’s long-term development objectives are defined in its ‘Development Cooperation Charter’, last updated in 2015. They include a strong focus on involving the Japanese private sector in development cooperation, particularly in Asia, to support sustainable and inclusive economic development in developing countries and to promote the national interests of Japan.
Japan has increasingly focused on development assistance for Africa, as the Japanese government has shown a growing interest in Africa in recent years and has been working on strengthening its cooperation within the continent. Following the sixth Tokyo International Conference on African Development (TICAD VI) in August 2016, the government announced that Japanese corporations had signed memoranda of understanding with 26 African nations and international organizations for knowledge and expertise exchange. This approach is relatively new; Japanese companies traditionally invest in Asia.
Greater development financing in Africa aligns with Japan’s new foreign policy, the ‘free and open Indo-Pacific Strategy’, announced in August 2016 by Prime Minister (PM) Shinzo Abe. The strategy focuses on connecting Africa and Asia to promote sustainable growth in the two regions. ODA will play an important role in the strategy and will involve capacity strengthening and infrastructure building in Africa and Asia.
Japan’s short-term development priorities are set in its annual ‘Priority Policy for International Cooperation’ and were foreshadowed in the annual budget released some months earlier. The Priority Policy is released annually and has contained the same broad priorities since FY2016. These are: peace and stability within the international community, response to global challenges, economic diplomacy, and promotion of ‘high-quality growth’. The FY2018 budget indicates this year will also include women’s empowerment and gender equality as a guiding principal. The Priority Policy for FY2018 is expected to be published in April or May 2018.
The government plans to use ODA increasingly as a strategic diplomatic and economic instrument, and further emphasize bilateral ODA. In the Development Cooperation Charter released in 2015, PM Abe approved the use of ODA to support foreign military forces for “non-military purposes”. This, alongside the explicit references to promoting Japan’s national interest, has signaled a shift in approach to ODA.
Japan provides the vast share of its ODA bilaterally (80% in 2016). This is well above the 62% average among members of the OECD’s Development Assistance Committee (DAC). In 2016, Japan provided 58% of its bilateral ODA in the form of loans (the rest in the form of grants). This is well above the DAC average (9% in 2016). For more details see question six: ‘How is ODA spent?’. Japan prefers to issue loans over grants due to its current budget constraints.
Japan allocates by far the largest share of its bilateral ODA to infrastructure projects (26%, or US$3.4 billion in 2016). The majority of this comprises loans for infrastructure projects in middle-income countries in Asia (US$2.6 billion; 77% of infrastructure ODA). This emphasis on infrastructure can be partially explained by Japan’s own experience after World War II when it received a great deal of infrastructure ODA, which helped rebuild its post-war economy.
The focus on infrastructure loans is set to continue: In August 2016, at TICAD VI, PM Abe pledged US$30 billion (over 2016 to 2018) in private- and public-sector funds for infrastructure and human-resource development projects in Africa. A third of the pledge (US$10 billion) will be dedicated to infrastructure projects, implemented in collaboration with the African Development Bank.
The second-largest share of bilateral ODA in 2016 went to the energy sector (13%; US$1.7 billion), followed by water and sanitation projects (10%; US$1.3 billion). Funding for agriculture is increasingly becoming a focus area, increasing by 27% since 2015 (US$839 million in 2016).
During its G7 presidency in 2016, Japan put a strong emphasis on health, women’s empowerment, and stabilization of the Middle East. In the lead up to the G7 Summit in May 2016, Japan announced a range of international commitments in these areas. The government pledged a total of US$1.1 billion to international health organizations, including US$800 million for the Global Fund to Fight AIDS, Tuberculosis and Malaria for the 2017 to 2019 replenishment period. Japan's total funding for global health was US$895 million in 2015, making it the fourth-largest DAC donor to the sector that year.
Japan’s key development priorities:
Free and open Indo-Pacific strategy: ODA will contribute to Japan’s overarching foreign policy strategy by supporting economic development in Africa and Asia and connectivity between these two regions.
National security and strategic diplomacy: To tackle root causes of conflict and terrorism, Japan is providing US$6 billion for 2016-2018 for human resource development in the Middle East, as well as funding for humanitarian assistance and security capacity building.
Global health: Prime Minister Abe announced a commitment of US$2.9 billion in funding for global health in December 2017 at the Universal Health Coverage (UHC) Conference.
Infrastructure: In 2016, 26% of bilateral ODA went to infrastructure development projects; the bulk of this funding goes to middle-income countries in Asia.
- Who are the main actors in Japan’s development cooperation?
The Ministry of Foreign Affairs steers policy; the Japan Agency for International Cooperation (JICA) leads implementation
The Prime Minister sets overarching priorities for Japan’s development policy. Prime Minister (PM) Shinzo Abe (Liberal Democratic Party, LDP) has been leading a conservative coalition government with the National Komeito Party (NKP) since December 2012. Under the leadership of PM Abe, the Cabinet Office established the Sustainable Development Goals Promotion Headquarters (SDGs HQ) in May 2016. SDGs HQ is chaired by PM Abe and its membership includes all cabinet members. It was established to coordinate and align the government’s efforts to achieve the SDGs.
The Ministry of Foreign Affairs (MOFA), led by Foreign Minister Taro Kono (LDP), sets development priorities in consultation with other ministries. Within MOFA, the International Cooperation Bureau (ICB) is responsible for designing development policy. ICB is currently led by Director-General Kazuya Nashida. ICB’s Global Issues Cooperation Division is responsible for multilateral policy and some sector policies.
JAPAN'S DEVELOPMENT COOPERATION SYSTEM
Other ministries are also involved in development policy: The Ministry of Finance (MOF), currently headed by Taro Aso (LDP) plays a key role, funding ODA loans that are implemented by Japan’s development agency, the Japan Agency for International Cooperation (JICA). It also manages contributions to multilateral development banks. The Ministry of Health, Labor, and Welfare (MHLW), led by Katsunobu Kato (LDP), is a strong advocate of Japan’s taking leadership on global health.
Under the supervision of the MOFA and the MOF, JICA is responsible for implementing bilateral aid through loans, grant aid, and technical cooperation. It is headed by Shinichi Kitaoka and employs almost 1,900 people (2017), including staff located across 100 country offices. The division of labor between MOFA and JICA has become more defined in recent years: MOFA steers policy making and JICA takes the lead on implementation.
Parliament: Japan’s Parliament, referred to as the ‘National Diet’, is composed of two chambers: the House of Representatives and the House of Councillors. Members of the Diet debate and vote on the budget, including for ODA. In the House of Councillors, the Special Committee on Official Development Assistance and Related Matters reviews the budget before it goes to the cabinet for approval. The Committee is powerful in influencing the strategic direction of development policy.
Civil Society: Since 2000, MOFA has increasingly promoted partnerships between the government and Japanese civil society organizations (CSOs) and in 2015, MOFA and CSOs jointly released a five-year plan for their collaboration on development activities. That said, CSOs are responsible for only 2% of ODA spending, well below the DAC average of 16%. This can be explained by the type of ODA Japan focuses on, e.g., infrastructure projects, that are more often implemented by private corporations. MOFA organizes dialogues with non-governmental organizations (NGOs) seven times a year. Important players are the Japan NGO Center for International Cooperation (JANIC) and the Japan Platform (an emergency humanitarian assistance organization), as well as three NGO networks: Ugoku, Japan Civil Society Network on Sustainable Development Goals, and the Global Compact Network Japan.
- How is the Japanese ODA budget structured?
The Ministry of Finance manages the largest share of ODA, because almost two-thirds of total ODA consists of loans
Japan’s ODA comes from a number of budgetary sources. Nearly 40% of ODA in FY2018 comes from the General Account, which comprises the regular budget of ministries. The remaining ODA comes from various other budget sources, including the Ministry of Finance’s Fiscal Investment and Loan Program (FILP), and capital from Japan’s development agency, the Japan Agency for International Cooperation (JICA).
Discussions around ODA targets and fluctuations usually focus on the General Account. This is due to the timing of the budget: the General Account is approved in December, while supplementary budgets are released throughout the year, as well as the certainty around the volume of ODA in the General Account, compared to the supplementary budget.
For FY2018, ODA from the General Account is budgeted at US$5.1 billion (¥554 billion; see table below). More than three-quarters of this (78% or US$4.0 billion, ¥434 billion in FY2018) is managed by the Ministry of Foreign Affairs (MOFA). The MOFA categorizes its ODA into three types: bilateral grants, technical cooperation, and contributions to multilateral agencies (except development banks).
In addition to funding from the regular ODA budget (General Account plus other ODA budget sources), MOFA and other relevant ministries usually receive a supplementary budget, which is approved later in the financial year. The loan program FILP, which covers the majority of Japan’s ODA loans (¥1.3 trillion, or US$12.2 billion, in FY2018) and most new initiatives are funded through the supplementary budget (see question five: ‘What are important decision-making opportunities in Japan’s annual budget process?’).
Japan’s ministries and agencies use, to varying degrees, resources from both the General Account and from the other budgetary sources.
- The Ministry of Finance (MOF) holds the largest share of the overall ODA budget. Most of its ODA funding is for FILP (US$12.8 billion in FY2018, or 64% of total gross ODA), which contains funds channeled through JICA, as well as government bonds. The MOF uses government bonds to disburse most of its assessed contributions to multilateral development banks. A smaller share (US$714 million in FY2018) of ODA spending by the MOF comes from the General Account: this funding is used for some assessed multilateral contributions, and to fund other grant and technical-cooperation programs. MOF also manages some funds from the special account for technical assistance and contributions to multilateral organizations, including the United Nations (UN).
- Ministry of Foreign Affairs (MOFA) manages about one-quarter (22%, or US$4.4 billion in FY2018) of Japanese ODA. This is sourced almost entirely from the General Account (US$4.0 billion in FY2018, 91% of MOFA’s ODA budget). The budget includes lines for bilateral funding (grant assistance and technical cooperation, mostly channeled through JICA) and multilateral funding. Multilateral funding comprises assessed and voluntary contributions to the UN and other multilaterals. This usually includes Gavi, the Vaccine Alliance, and the Global Fund to Fight AIDS, Tuberculosis and Malaria.
- JICA manages approximately 60% of total ODA expenditure. In addition, JICA administers large shares of funding for grant assistance and technical cooperation that come from MOFA’s General Account budget, and also receives funding from MOFA’s Fiscal Investment and Loan Program (FILP).
Overview - Japan's ODA budget FY2018
General Account Budget 5,091 553,800 Ministry of Foreign Affairs 3,993 434,400 Grants 1,475 160,500 Technical cooperation through JICA 1,383 150,500 Multilateral contributions, of which: 476 51,800 Mandatory contributions 222 24,200 Voluntary contributions 253 27,500 Other assistance (incl. admin costs, CSO funding, support for JICA loans) 660 71,800 Ministry of Finance 714 77,600 Other ministries and agencies 384 41,800 Special Account 9 1,000 MOF and others (Technical cooperation) 4 400 MOF and others (Multilateral contributions) 6 600 Investment and contribution bonds 1,989 216,400 UN and related agencies 383 41,700 Multilateral development banks 1,606 174,700 Fiscal Investment and Loan Program 12,812 1,393,800 Technical cooperation by MOF and others 637 69,300 JICA loan, JICA investment bond, JICA loan collection by MOF and others 12,175 1,325,500 Total gross ODA 19,901 2,165,000 Loan repayments 6,628 721,013 Total net ODA 13,273 1,444,000
- What are important decision-making opportunities in Japan’s annual budget process?
Initial allocations are determined from April to August; Cabinet makes final decisions in December and January
Japan’s fiscal year runs from 1 April to 30 March. However, certain budget allocations are decided throughout the year (see ‘supplementary budgets’ below).
- Ministries prepare their budget requests: From April to August, all ministries draft their funding requests for the upcoming fiscal year. This includes the Ministry of Foreign Affairs’ (MOFA) grant aid budget, and technical cooperation channeled through the Japan Agency for International Cooperation (JICA). Key stakeholders during this phase are senior officials at MOFA’s International Cooperation Bureau.
- MOF assesses ministerial budget request: Between September and December, once the ministries submit their budget requests, the Ministry of Finance (MOF) assesses them and forwards them to the Cabinet. This process is complete by December.
- Cabinet makes final decision on draft budget bill: Around December, the Cabinet makes its final decision on ministries’ budget requests and presents the draft budget bill to Parliament (the ‘Diet’), usually by mid-January.
- The Diet debates the draft budget: From January to March, ministerial budgets are discussed by the House of Representatives’ Budget Committee. Amendments to funding lines are rare at this stage, particularly under the current Liberal Democratic Party-led coalition, which holds a majority in both chambers of the Diet. Once approved by the Diet, the budget bill is adopted.
- Supplementary budgets: In addition to this annual budget cycle, ministries can submit supplementary budget requests for the ongoing fiscal year between August and November. These are assessed by the MOF, negotiated in the Diet, and approved by the Cabinet and the Parliament between December and January.
Apart from year-to-year allocations, the Prime Minister has ample discretion to commit new funding through multi-year initiatives. For example, Prime Minister Abe announced a commitment of US$2.9 billion in funding for global health in December 2017 at the Universal Health Coverage (UHC) Conference.
- How is Japan’s ODA spent?
Japan provides most of its ODA in the form of loans
Japan provides the majority of its ODA bilaterally (80% in 2016). This is well above the 62% average among members of the Development Assistance Committee (DAC) of the OECD. This share is expected to further increase; the government Prime Minister Shinzo Abe plans on increasingly using ODA as a strategic diplomatic and economic instrument. To do so, a great proportion of ODA will target specific countries and therefore likely increase the share of bilateral funding. Despite its current bilateral emphasis, Japan is the fifth-largest donor to multilateral organizations (US$3.4 billion in core contributions in 2016). The largest recipients of financing in 2016 were the World Bank (48%), regional development banks (16%, mostly the Asian Development Bank), and UN agencies (15%).
Japan channels its bilateral ODA mostly as loans: 58% in 2016. This is well above the DAC average of 9%. This strong focus on loans is largely explained by Japan’s focus on infrastructure projects in middle-income countries (MICs) in Asia that are mainly supported by loans. Loans are preferred over grants due to Japan’s difficult economic situation, which constrains budgetary spending. Japan’s loans are highly concessional: interest rates are low and grace periods are long. Japan’s use of loans is expected to increase further.
Who are Japan's ODA recipients?
Japan places a strong focus on MICs in Asia
The largest share of Japan’s bilateral ODA is for middle-income countries (MICs) (60% between 2014 and 2016), due to Japan’s focus on Asian countries. Between 2014 and 2016, Asian MICs received 56% of bilateral ODA overall. 22% of ODA over the same period was allocated to low-income countries (LICs), which is close to the DAC average of 25%.
Japan’s bilateral ODA is concentrated: the top 20 recipients receive 60% of funding. According to Japan’s development policy framework, the ‘Development Cooperation Charter’, Asia will maintain its geographic focus. Sub-Saharan Africa accounted for 11% of bilateral ODA between 2014 and 2016, below the DAC average (22%). However, Japan has shown signs of increasing focus on Africa, as demonstrated by its US$30 billion pledge of private- and public-sector funds to Africa during the 6th Tokyo International Conference on African Development (TICAD VI) in August 2016. TICAD is a conference organized by the Japanese government to promote Africa’s development.
How is bilateral funding programmed?
MOFA’s Country Assistance Planning Divisions drive bilateral priorities and allocations
Under strategic guidance set in the Development Cooperation Charter, the Ministry of Foreign Affairs’ (MOFA) Country Assistance Planning Divisions (Divisions) draft multi-annual Country Assistance Policies (CAPs) for selected partner countries. The Divisions consult recipient governments and seek input from Japan’s ODA Task Forces. These Task Forces are in-country teams that coordinate bilateral ODA and are usually made up of staff from embassies and the Japan Agency for International Cooperation’s (JICA) country offices. The CAPs outline priority areas of Japan’s bilateral development funding.
Each CAP consists of a five-year rolling plan, which provides indicative funding amounts. The plans are updated annually and approved by MOFA. The ODA Task Forces draft the rolling plans in consultation with recipient governments and other donors. The DAC Peer Review 2014 found that this mechanism increased coordination of Japan’s development assistance and predictability for partner countries. However, it also criticized the fact that decision-making at MOFA and JICA remains centralized and recommended that decision-making and financial authority be delegated more to country offices.
Key stakeholders are MOFA’s Country Assistance Planning Divisions (for grant assistance and technical cooperation), Ministry of Finance’s (MOF) International Bureau (for loans), and JICA’s Human Development, Rural Development and regional departments.
How will Japan’s ODA develop?
- Japan’s ODA is expected to slightly increase in the short term: Japan’s net ODA in FY2018 is 5% higher compared to the FY2017 budget. This includes an increase in the ODA budget of the Ministry of Foreign Affairs of 0.7%.
- In line with the government’s plan to increasingly use ODA as a strategic diplomatic and economic instrument, Japan’s bilateral ODA is likely to increase in comparison to the country’s multilateral contributions.
What will Japan’s ODA focus on?
- Japan’s strong focus on Asia is expected to continue, due to the country’s strong economic, diplomatic, and historic ties to the region. Japan’s engagement with Asia and Africa will continue to be guided by the ‘free and open Indo-Pacific Strategy’
- Japan is strengthening its relationship with Africa. This is demonstrated by its US$30 billion pledge in public and private funding for 2016 to 2018 at the sixth Tokyo International Conference on African Development (TICAD VI).
- Security and stability will remain a priority. In the framework of its G7 presidency, Japan committed US$6 billion in funding for 2016 to 2018 to foster stability in the Middle East, including support in human resource development and humanitarian relief programs.
What are key opportunities for shaping Japan’s development policy?
- The Japanese government will participate in the High-level Political Forum on Sustainable Development and the SDGs in July 2018 in New York. As cabinet members are expected to attend, this event provides an opportunity to take a closer look at Japan’s development policy and to advocate for increases in ODA spending in the coming years.
- The United Nations General Assembly (UNGA) High Level Meeting on Universal Health Coverage (UHC) will be held in 2019. Japan may be involved in setting up a committee for this event, as it did for the December 2017 UHC Forum held in Tokyo.
- TICAD VII will be held in Yokohama in 2019. The conference offers an opportunity to foster dialogue with African nations and promote aid and investment.
- Japan will host the Nutrition Summit in 2020, as announced by Prime Minister Shinzo Abe at the UHC Forum in December 2017. There will be many opportunities in the lead up to this event, including the event itself, to engage with global stakeholders on nutrition and health.