Will Japan increase aid and improve its allocation to help the poorer countries achieve the millennium development goals?

Developed countries have pledged to increase financial assistance to poor countries in order to help them
achieve the Millennium Development Goals. A few donors such as the US and the UK have been
increasing their financial assistance in the recent past, but this trend has yet to be generalised across the
donor community. Japan is among the largest aid donors, but has as yet not followed the US and the UK
in increasing her aid budget. This paper sets the task of examining the prospects of Japanese aid to
increase significantly in the coming years, and its allocation to be re-directed towards the most aid needy
countries. To this end, we turn to the past to investigate how Japanese aid policies have changed over time
and also identify empirically the major determinants of aid allocation. Our study shows that whilst Japan’s
aid has increased in the past, in response to the broadening of its aid policy to include humanitarian and
development objectives, the empirical analysis on aid allocation shows that geo-economic interests have
played a crucial role. Given the historical trend one can conclude that the same determinant factors may
keep on playing vital roles in aid allocation decision-making at least for some years to come, even though
there has been an increased call for more assistance to poor regions.