Japan shelves aid plan to China

Japan is delaying funding decisions for low-interest loan projects in China in the fiscal year starting April due to souring of ties with its Asian neighbour.

    Relations soured after Koizumi's visit (R) to a controversial shrine

    Shinzo Abe, the Chief Cabinet Secretary, said on Thursday that Tokyo "will put off making a decision within the fiscal year".

    For the first time since Japan began providing aid to its neighbour in 1979, Japan will not decide on loans by the end of the fiscal year.

    The government "needs some more time to adjust opinions, given the various situations surrounding current relations between Japan and China," he told reporters.

    But Abe said Japan would still eventually provide loans to China in the next fiscal year for the sake of "future-oriented Japan-China relations".

    The two countries have agreed to end Japan's official aid by mid-2008, the time of the Beijing Olympics which is set to symbolise China's new global clout.


    Japan provides the vast majority of its aid to China in soft loans rather than grants.

    "[The government] needs some more time to adjust opinions, given the various situations surrounding current relations between Japan and China"

    Shinzo Abe, 
    Japan's Chief Cabinet Secretary

    Yen-loan projects are usually decided late in a fiscal year for disbursement the following year or over several years to come.

    Japan last year exchanged notes with China on seven yen-loan projects on 29 March worth a total of $734 million.

    This time around, Japan is expected to consider loans to China in April or later, Jiji Press news agency said.

    Bilateral relations have steadily deteriorated, with China furious at visits of Junichiro Koizumi, the Prime Minister of Japan, to a shrine honouring war dead including World War II war criminals.

    Japan's low-interest loans to China have exceeded three trillion yen for projects that include the building of highways, airports, sewage systems and other infrastructure.



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