Donor Profile: Japan

Last updated: January 3, 2023

Summary



ODA Spending


ODA in Context

Japan’s ODA stood at US$17.6 billion in 2021 (current prices), making Japan the third-largest OECD DAC donor country in absolute terms and the largest in Asia.


ODA represents 0.34% of Japan’s GNI, making it the 12th-largest DAC donor relative to its GNI.




Japan’s total ODA in FY2022 is estimated to decrease by 10%, compared to FY2021. Projections may not hold considering recent changes in the international geopolitical space including the COVID-19 response and the full-scale Russian invasion of Ukraine, among other global crises. The government aims to increase its overall ODA, as it announced plans to review its current ‘Development Cooperation Charter’ at the end of 2022.



ODA Breakdown


Japan provides most of its ODA bilaterally (83% in 2020), which is well above the 58% OECD DAC average.


Japan channels its bilateral ODA mostly as loans: 68% in 2020, which is six times greater than the DAC average of 11%. This is largely explained by Japan’s focus on infrastructure projects, most of which are supported by loans. Japan’s loans typically feature long grace periods and low-interest rates. Japan’s use of loans in ODA is expected to increase further.



Bilateral Spending


Japan allocates the largest share of its bilateral ODA to infrastructure projects. In 2020, funding to this sector stood at US$4.8 billion, which accounted for more than a quarter (29%) of Japan’s bilateral ODA. The second-largest share of bilateral ODA in 2020 went toward general budget support (13%, or US$2.2 billion) followed by the energy sector (11%, or US$1.9 billion), and multi-sector activities (10%, or US$1.7 billion).


The largest share of Japan’s bilateral ODA goes to lower-middle-income countries: 66% in 2020, compared to the OECD DAC average of 23% for these countries. This is due in large part to Japan’s focus on Asian countries.


In 2020, Asian countries received 60% of Japan’s bilateral ODA overall. The largest recipients were Bangladesh (US$2.1 billion, or 13% of bilateral ODA), India (US$1.8 billion, or 11%), and Indonesia (US$1.4 billion, or 8%). Most of this funding was disbursed as loans. According to Japan’s development policy framework, the ‘Development Cooperation Charter,’ Asia will remain Japan’s geographic focus, as it highlights the need for regional connectivity. This has been reflected in past ODA spending.


Japan is nevertheless showing signs of increased focus on Africa in line with the ‘Free and Open Indo-Pacific’ strategy introduced by former Prime Minister Shinzo Abe in 2016. The strategy focuses on connecting Africa and Asia to promote sustainable growth, predominantly using ODA for capacity strengthening and “quality infrastructure” building in the two regions.



Multilateral Spending and Commitments


Japan prefers to channel the majority (83%) of its bilateral ODA through the public sector compared to other members of the DAC ( DAC average: 46%). Much less bilateral ODA is channeled through multilateral organizations (17%; DAC average: 22%) and NGOs (1%; DAC average: 19%).


Japan’s stable support to multilaterals can be partly explained by its leadership role in several major events and related multi-year pledges. In the lead-up to its G7 presidency in 2016, Japan announced a range of funding commitments to multilateral organizations in health, women’s empowerment, and stabilization of the Middle East, including US$800 million to the Global Fund for the 2017-2019 replenishment period. Japan subsequently pledged an additional US$840 million to the fund for the 2020-2022 period.


Recent commitments to multilateral organizations are summarized below.



Politics & Priorities


Political Context


Japan is a constitutional monarchy with a parliamentary system. The national government is divided between the Prime Minister (who is selected by the Emperor), the National Diet (the legislative arm), and the Supreme Court. Elections within the Diet take place every four years for the lower house and three years for the upper house. Japan has a multi-party system, but there are four main parties represented in the Diet: the Liberal Democratic Party, Komeito, the Constitutional Democratic Party, and the Japan Innovation Party.


The current Prime Minster, Fumio Kishida, assumed office in October 2021.


Main Actors


Click for more details on each actor.


Development Priorities


Japan’s long-term development objectives are defined in its ‘Development Cooperation Charter,’ which was devised in 2015. Though approved before the finalization of the 2030 agenda, the charter broadly aligns with the SDGs. There is an ongoing roundtable of experts tasked with the revision of the outline of Development Cooperation Charter, and the revised charter will be published in 2023.


The charter identifies three priority areas:

  1. Realization of ‘quality growth’ and poverty reduction;
  2. Maintaining a peaceful and secure society, including good governance, peacebuilding, and humanitarian assistance; and
  3. Building a resilient and sustainable international community by addressing global issues such as environmental and climate change, infectious diseases, and food and energy issues.

Japanese development cooperation further commits itself to an overarching focus on human security, gender, peace and prosperity, and self-reliant development and collaboration based on Japan’s experience and expertise.


Japan’s short-term development priorities are set in its annual ‘Priority Policy for International Cooperation’ document and are foreshadowed in the annual budget released months earlier. The Priority Policy has contained the same broad priorities since FY2016:

  • Peace and stability within the international community
  • Responding to global challenges
  • Economic diplomacy
  • Promotion of “high-quality growth.”

The government emphasizes the role of ODA as a strategic diplomatic and economic instrument in the ‘Development Cooperation Charter’ and the ‘Free and Open Indo-Pacific’ strategy. This involves, for example, making use of bilateral ODA over multilateral, as well as approval to use ODA to support foreign military forces for “non-military purposes.” These trends underscore Japan’s explicit references in its foreign policy documents to promoting national interests through ODA.


By issue


Global health: Japan was the fourth-largest donor to global health among members of the OECD DAC in 2020. Japan prioritizes global health in its ODA policy framework, the ‘Development Cooperation Charter,’ with an emphasis on quality health care, infectious disease control, and UHC. In May 2022, Japan finalized a new global health policy, which focuses on strengthening preparedness, prevention, and response to public health crises, including pandemics, and on achieving more resilient, equitable, and sustainable UHC as the world copes with COVID-19 response. The policy also aims to increase Japan’s total health ODA and comes in the lead-up to Japan’s G7 presidency in 2023.


Read more about Japan’s ODA to Global Health


Climate: Japan remains the highest DAC donor for climate-related ODA in relative terms and emerged as highest DAC donor in absolute terms in 2020. Japan references both climate change mitigation and adaptation as priorities in its ‘Development Cooperation Charter.’ In addition, the JICA ‘Climate Cooperation Strategy’ (last updated in 2016) focuses on climate-resilient infrastructure, climate risk management, climate policy and institution building, and forest and ecosystem conservation.


Read more about Japan’s ODA related to Climate Change


Agriculture: Japan is the third-largest donor to agriculture and mentions agriculture, forestry, and fisheries as part of its assistance towards “quality growth” in its ‘Development Cooperation Charter.’ Most of the country’s bilateral ODA for agriculture and rural development is channeled through JICA, which focuses on promoting sustainable agriculture production, stable food supply, and dynamic rural communities. Japan has historically supported small-scale farming and is likely to continue to do so.


Read more about Japan’s ODA related to Agriculture


Neither gender equality nor education are major priorities for Japan; however, both issues are included within Japan’s ‘Development Cooperation Charter’ as key development sectors.


Read more about Japan’s ODA for Gender Equality


Read more about Japan’s ODA for Education


By region


Asia remains the priority region in Japan’s development cooperation, as it highlights the need for regional connectivity. In 2020, Asian countries received 60% of Japan’s bilateral ODA overall. According to Japan’s development policy framework, the ‘Development Cooperation Charter,’ Asia will remain Japan’s geographic focus, as has been reflected in past ODA spending.


Japan has also strengthened its development focus on Africa in line with the ‘Free and Open Indo-Pacific’ strategy introduced by former Prime Minister Shinzo Abe in 2016 and endorsed by current Prime Minister Fumio Kishida. The strategy focuses on connecting Africa and Asia to promote sustainable growth in the two regions. ODA plays an important role in the strategy and involves capacity strengthening and “quality infrastructure” building in Africa and Asia. In response to the COVID-19 crisis, the Japanese government has focused its support for Africa under three primary themes:

  1. Strengthening Africa’s capacity to respond to COVID-19;
  2. Building resilient and inclusive health and medical systems; and
  3. Responding to the socio-economic impacts of COVID-19.

Japan has also used the Tokyo International Conference on African Development as a forum to drive its African development agenda based on the principles of African ownership and international partnership, with the health sector being one of the priority areas. At TICAD VII in August 2019, Japan stressed its commitment to supporting private investment in Africa and launched the ‘Africa Health and Wellbeing Initiative,’ which aims to share Japan’s global health knowledge and technology with African countries. TICAD VIII was held in Tunisia in August 2022. Despite these initiatives, ‘:abbrSub-Saharan Africa’ only accounted for 8% of Japan’s bilateral ODA in 2020, well below the DAC average of 21%.


Political Outlook

Prime Minister Fumio Kishida assumed office in October 2021, following the resignation of former Prime Minister Yoshihide Suga. Since assuming office, Kishida has emphasized his commitment to tackling global challenges such as climate change, the attainment of UHC, and poverty reduction.


As it prepares to host the G7 presidency in 2023, Japan has taken bold steps to strengthen its role in global health security and global development cooperation as a whole. Japan announced plans to review its ODA guidelines with the aim of increasing its total ODA budget after 2023. In May 2022, Japan finalized its new ‘Global Health Strategy,’ which will focus on pandemic prevention and preparedness, and on achieving more resilient, equitable, and sustainable UHC.


Budget


Budget breakdown


Japan’s ODA comes from several budgetary sources. More than one-third (36%) of ODA in FY2022 comes from the General Account, which comprises the regular budget for all ministries. For FY2022, ODA from the General Account is budgeted at US$5.3 billion (¥561 billion; see table below). Additional ODA comes from various other budget sources, including the Special Account, the Ministry of Finance’s FILP, and capital from JICA. Special accounts make up a minor share of where ODA is allocated, but they are dedicated to specific government activities, have their own specific revenue source (like interest, borrowing, etc.) and receive transfers from the general account.


Japan’s ministries and agencies use resources from both the General Account and other budgetary sources. There are three primary players:

  • MOF manages the largest share of the overall ODA budget (77%, or US$16.4 billion in FY2022), as most of MOF’s ODA funding is for loans through FILP (US$13.5 billion in FY2022, or 63% of total gross ODA). This includes funds channeled through JICA, as well as government bonds, which are used to make most of MOF’s assessed contributions to multilateral development banks. A smaller share (US$729 million in FY2022) of ODA spending by MOF comes from the General Account.
  • MOFA manages about one-fifth (21%, or US$4.6 billion in FY2022) of Japanese ODA, almost all of which is sourced from the General Account. The budget includes lines for bilateral funding (grant assistance and technical cooperation, mostly channeled through JICA) and multilateral funding.
  • JICA directs a large share of MOF’s ODA funding, with JICA’s share alone making up 37% of the total ODA budget (US$7.9 billion in FY2022). This mainly comes from its own capital and is used for loans. In addition, JICA administers large shares of funding for grant assistance and technical cooperation that come from MOFA’s General Account budget.

The budget table below displays ODA funding lines for FY2022.



Budget Process


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 MOFA grant assistance budget, as well as technical cooperation, channeled through JICA. Key stakeholders during this phase are senior officials at MOFA’s International Cooperation Bureau.
  • MOF assesses ministerial budget requests: Between September and December, once the ministries have submitted their budget requests, 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 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. 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 Diet between December and January.

Apart from year-to-year allocations, the Prime Minister has ample discretion to commit new funding to multi-year initiatives. For example, former Prime Minister Shinzo Abe announced a commitment of US$2.9 billion in funding for global health in December 2017 at the UHC Conference.


Issue Deep-Dives

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Qi Liu

qliu@seekdevelopment.org

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