forms of support.

-While emphasizing the efforts of debtor countries to repay their debts, Japan will extend substantial debt relief through rescheduling and grants-in-aid to cover repayments based on the international framework.

-Efforts will be made to allocate funds freed through debt relief to development goals, such as the alleviation of poverty; the provision of education, health, medical, and other social investments; and the creation of employment opportunities.

-As a rule, financial cooperation after debt relief will take the form of grants, as the provision of new loans is unlikely after debt relief.

-Japan will actively undertake technical cooperation (human resources development and intellectual support) to enhance debt-management capacities and facilitate appropriate macroeconomic management.

-Henceforth, Japan will exercise greater caution in the provision of Yen loans and will pay greater attention to the developmental stage and debt-servicing capabilities of recipient countries, while taking into careful consideration the development plans of the developing countries and Japan's own ODA policies.

### I II. Priority Issues and Sectors by Region

Japan has extended ODA to more than 150 countries and ranked as the top bilateral donor to 47 of these countries in 1996. $ ^{*25} $ Through ODA, Japan has made a major contribution to the development of numerous countries. For reasons of geographic proximity and historical and present ties, Japan's ODA assistance has traditionally been focused on the Asian region and will remain focused on those countries with whom Japan maintains close relations. At the same time, given the global expansion of economic interdependence and the need to take concerted international action to cope with such global-scale challenges as humanitarian problems and the maintenance of international stability and prosperity, Japan will continue its extension of aid to regions outside Asia.

### 1. East Asia

East Asia is a region of special focus for Japanese ODA, with Japan accounting for nearly 60% of the total bilateral aid to this region provided by DAC member countries during the five-year period beginning in 1992. Over the years, Japanese ODA has made a major contribution to economic growth in this region through human resources development and social and economic infrastructure building. Similarly, Japan has contributed to alleviating the problems of poverty and environmental pollution through its assistance for social development and environmental conservation.

Japan enjoys close economic and other forms of ties with East Asia and will continue to provide appropriate forms of assistance in line with the highly diverse levels of income, progress made toward market economy, the social situation, and the natural environmental conditions found among these countries. Southeast Asian countries have enjoyed high rates of economic growth in recent years, and it is highly important for Japan to provide assistance that will help these countries overcome their current difficulties, achieve economic recovery and maintain political and social stability. It is necessary for Japan to provide assistance designed to alleviate poverty and to support continued economic growth and the transition to market economies in low-income countries. China has a population of more than 1.2 billion and its development will have a major global impact. Therefore, it is important for Japan to support China's Open and Reform Policy while encouraging it to become a more constructive partner in the international community. Japan's assistance to China should also be focused on its efforts, such as the elimination of regional disparities and environmental problems. Recent developments in East Asia indicate a movement toward closer regional cooperation and a regional approach to development. Moreover, East Asia is witnessing the appearance of "emerging donors" who are starting their own programs for assistance to developing countries. It is necessary for Japan to provide appropriate forms of assistance to support and promote these positive developments.

In light of the above, Japan will provide assistance and support while emphasizing the following points.

(1) Japan will provide support for economic structural adjustment to overcome the economic crisis and to achieve economic recovery.

(2) Japan will provide active support to the socially vulnerable to improve their living standards and domestic conditions.

(3) Japan will provide support for human resources development and institutional building to promote the development of supporting industries and appropriate social and economic management.

(4) Japan will adjust its assistance to poverty alleviation programs, social and economic infrastructure development, environmental protection, and agricultural and rural development projects to conform to the needs and conditions of individual countries.