Japan also suspended direct aid, but has kept a lower profile than Europe and the US, saying it hopes to be seen as a neutral player in the Middle East.

Recent press reports, denied by officials in Japan, have said the country has already agreed in principle to resume aid to the Palestinian government.

Coalition

Hamas formed a coalition government with Fatah, the movement of Mahmoud Abbas, the president, in March this year.

But donors have refused to lift the financial ban until Hamas explicitly renounces violence and agrees to recognise Israel and abide by past peace deals.
 
The unity government has said it will "respect" previous agreements with Israel, but its platform does not call for recognising Israel and asserts that Palestinian resistance against the Israeli occupation in "all its forms" is a legitimate right.

The boycott has emptied the coffers of the Palestinian Authority. Civil servants not receiving full salaries for more than a year, amid bloodshed between rival Palestinian factions.

Japan in March hosted a meeting between Israeli and Palestinian envoys in a bid to increase its influence in the region as it seeks a greater global role.

In 2006, Tokyo announced a plan to build an agro-industrial park in the West Bank in a bid to close the income gap between the Palestinians and Israelis.