Countering Disorder: Japanese Official Development Assistance

P. Strefford, 13th May 2023.

[Note: The Iconoclast was an outgrowth of the activities of the Hestia group’s annual gatherings and existed to share opinions derived from discussions that occurred at and around those events. Unfortunately, Covid-19 put the group’s activities on hold for a significant amount of time but recently we were able to hold our first in-person event in over two years. You can read a summary of the event here. With a return to such events, we will also return to sharing opinions on various issues.]

In March 2023, PM Kishida Fumio, paraphrased Japan’s regional foreign policy as, “We will enhance the connectivity of the Indo-Pacific region, foster the region into a place that values freedom, the rule of law, free from force or coercion, and make it prosperous.” From this speech, we can see that Japan is asserting that it will play an active role in maintaining the Rule-Based International Order. However, this speech also insinuates the necessity for military power in order to counter ‘force or coercion’ that may be utilized to undermine such a free and rule-based order. Finally, Japan will continue to support development and prosperity in the Indo-Pacific region. Japan’s foreign policy is often simplified with the umbrella catchphrase of a ‘Free and Open Indo-Pacific’ (FOIP).

Since rebuilding itself after World War Two, Japan focused its foreign policy on economic and political initiatives necessary for Japan’s peace and prosperity, and placed itself in a position of subservience to the US in terms of national and regional security. This was a clear and conscious decision and was first manifested in the Yoshida Doctrine. In essence, PM Yoshida (1948-54) made the decision to focus on reconstruction and rely on the security alliance with US for Japan’s national security. This position was also maintained despite repeated attempts by the US itself to coerce Japan into a more proactive regional security role. We can say that the change towards a more ‘proactive’ Japanese foreign and defense policy is by no means a revolutionary change, as Japan’s foreign and defense policy has been continuously evolving, especially since the end of the first Cold War. The policy of advocating for, and proactively supporting, a Free and Open Indo-Pacific is an indicator of Japan’s awareness of the weakening of the post-Cold War US-hegemonic International Order (that which has served Japan so well).

It has become increasingly clear that the US supremacy which created and underpinned the international order, is waning. There are a number of reasons for this. One is the global shift in comparative economic and military power. Another is the de-legitimization of US, and Western values in general, resulting both from the use of US, and Western, military power to pursue foreign policy goals that are in contravention to said values. Another is the anti-democratic, and anti-liberal policies pursued by Western governments domestically. It could be said therefore that the US’s unipolar moment has been tragically squandered. US military power has been used and misused so recklessly, that the result has been an increase in international disorder, as well as the aforementioned delegitimization of the West. The reaction to the war in Ukraine has highlighted not only the limited competence and impractical worldview of most Western leaders, but also the divergence of many non-Western states from that worldview. The sanctions against Russia have not only not have the desired effect on the Russian state but have in fact caused considerable harm to the economies of Western Europe, in particular. These same sanctions have also received very little support outside of the West.

Culturally speaking, Japan is not a Western country. However, Japan has internalized many of the traditional liberal values of the West. Japan is also a Great Power, and like all other Great Powers, is both a key player in, and highly dependent on the global economy, the survival of which is dependent on an international order (though not necessarily the prior order).

So, the question is, how is Japan trying to deal with this disruption to the global balance of power? One way of answering this question is to look at the extent to which Japan’s foreign and defense policies are, like those of all other Great Powers, increasingly merging. Of course, defense policy is commonly an intrinsic component of foreign policy. However, in the case of post- WWII Japan, as previously outlined, the two have been strictly, at least in principle, divided and separated. We can investigate this integration by looking at the expansion of Japan’s Overseas Development Assistance (ODA). In doing so we can see that there is an inextricable link between its rise and similar growth in Japan’s defense spending.

Expansion of defense and ODA spending

Importantly, when we talk of Japan’s defense spending, it is necessary to take into account the enormous amount of spending on US forces in Japan, which is included within Japan’s military budget. An example of this expenditure is the relocation of US bases in Okinawa. The increase in defense spending began in 2012, with an increase of just under 5% over 2011. Over the next ten years, spending increased by over 5% each year. However, these increases would be further enhanced by the ‘Defense-strengthening Acceleration Package’ that began in 2022. In that year, total expenditures were ¥5.8661 trillion, an increase of ¥355.9 billion (6.5%) over the combined FY2021 initial budget, plus the FY2020 supplementary budget (part of the Defense-strengthening Acceleration Package). If the spending on U.S. Forces relocation is included, the increase goes up to ¥445.4 billion (7.8%). The defense budget for FY2023 would see further expansion. The budget for FY2023 would be ¥6.6001 trillion yen (¥6,821.9 billion if expenses such as US Forces realignment expenses are included). This increase in spending has raised Japan’s defense budget to over 1% of GDP, and the government has announced that spending will increase to 2% of GDP by 2027.

In the FY2023 budget, it was also announced that the budget for Official Development Assistance (ODA) would also increase from its FY2022 561.2 billion yen to 570.9 billion yen. This was an increase of 1.7%, or 9.8 billion yen. While this is a minimal increase in a relatively small budget, this was the largest increase in the ODA budget since 1997, when the level of ODA peaked at 1.1687 trillion yen. The rationale for these increases can be found in the National Security Strategy of 2022.

National Security Strategy
Japan’s national security priorities, rationale and tools can be understood by looking at its National Security Strategy (NSS), the latest version of which was released in December 2022. As stated by PM Kishida in the March 2023 speech, the NSS asserts that Japan will maintain and develop a free and open international order, especially in the Indo-Pacific region where Japan is situated. This can be seen as a geographical expansion of Japan’s defense policy. The NSS further asserts, “Strategic Use of ODA and Other International Cooperation Guided by the vision of a FOIP.” We could say that Japanese ODA has always been used, to varying degrees, strategically. Furthermore, Japan’s ODA has always been focused on Asia, and more specifically Southeast Asia. The vision of an FOIP is a recognition of Japan’s position as a maritime nation, dependent on the sea lanes of the Indian and Pacific oceans. However, the assertion of Japan’s proactive stance on supporting a FOIP is a reflection of the perception within Japan that there exist threats to this, as well as a perception of America’s increasing inability to deal with such threats unilaterally.

In the section on major tools that Japan can utilize to achieve its goal of maintaining a Free and Open Indo-Pacific, it provides more detail on the ‘Other International Cooperation’, in addition to ODA, that will be provided. “For the purpose of deepening security cooperation with like-minded countries, apart from ODA for the economic and social development of developing countries and other purposes, a new cooperation framework for the benefit of armed forces and other related organizations will be established.” It is here that we can see a clear break with the past. The government of Japan has here declared that it will, for the first time, provide some type of military assistance to countries overseas. Throughout the entire post-WWII era, Japan has long asserted that its foreign assistance is strictly for development only, and can in no way be used for military purposes. This was stated as one of the principles of Japan’s ODA in the 1992 ODA Charter. It was stated again in the 2003 revision, and in the new Development Cooperation Charter of 2015. The NSS further states that, “Japan will provide equipment and supplies as well as assistance for the development of infrastructures to like-minded countries in view of strengthening their security capacities and improving their deterrence capabilities.” There can be no doubt that this new cooperation framework is defense oriented.

Broadening Overseas Cooperation
In March 2023, the Japanese government announced that this new cooperation framework would be called, Overseas Security Assistance (OSA). The OSA would “grant aid to armed forces and other organizations of like-minded countries”, and would focus on maritime security, hence its inclusion within the FOIP framework. Importantly, due to the restrictions against military use of ODA, OSA is separate to ODA, and so the overseas assistance provided by OSA is in addition to that of ODA, and represents a further expansion of Japan’s foreign assistance.  

OSA, will be implemented jointly by the National Security Secretariat and the Foreign and Defense Ministries. According to its fiscal 2023 budget, the government has set aside ¥2 billion ($15 million) for overseas defense-related assistance, under the auspices of OSA.

In April 2023, the Japanese government announced plans to revise the 2015 Development Cooperation Charter. The revision of this charter, which outlines the goals, principles and guidelines for Japan’s overseas development cooperation, is a direct consequence of the 2022 NSS. Interestingly, the 2015 revision to Japanese ODA policy that resulted in the Development Cooperation Charter took place when current Prime Minister Kishida was Foreign Minister. At the time, he announced that, because of the evolving international situation, a review of Japanese ODA policy and practice was necessary. The Development Cooperation Charter (DCC) was intended to broaden the scope of Japan’s development assistance to include both public and private flows to developing countries. The 2022 NSS also included the statement, “Japan will strengthen its support for overseas operation of Japanese companies, and enhance collaboration between ODA, and other non-ODA public funds”. We can therefore see, in addition to the merging of foreign and defense policy, the admission of the linkage between public and private overseas investments.

More assistance, and more ‘proactive’ assistance
Since the beginning of Japan’s ODA in the 1950s, Japanese development aid has been given according to a “request-based” formula. In principle this means that the developing country makes a request to the Japanese Embassy in that country, and this request is then sent to Tokyo. In the 2023 draft of the revised Development Cooperation Charter, it is stated that Japan will move towards an “offer-type” method of giving aid, and move away from waiting for requests for aid from recipients. It is expected that this shift would allow Japan to give aid more effectively, and this is very important because it is probably not possible for the government to raise overall ODA spending so significantly, because of the poor situation regarding Japanese public finance. While it is said that this is a major shift in Japan’s policy and practice, it is a simplification to state that Japan’s ODA was provided according to requests from recipient countries. The reality was far more complex than this simple procedure. For example, Japanese companies and consultancies have offices overseas in the developing countries that receive ODA from Japan. Many of these companies and consultancies carry out both privately financed projects and publicly financed projects (ODA). These are key stakeholders, along with recipient country governments, in the “business” of ODA. It is often the case that these Japanese companies and consultancies collaborate with the recipient country government in making applications to the Japanese Embassy for ODA. Indeed, it is the case that these Japanese companies and consultancies facilitate the “request-based” application procedure. In other words, the role of the recipient country is at times entirely passive and Japanese companies based in the target state, and operating under Foreign Ministry guidance, act as initiators of Japan’s ODA programs

The draft of the DCC also includes “support for overseas expansion of Japanese companies” as one of the “needs for revision and new directions” in the revised DCC. While this is in line with the 2022 NSS in terms of public-private partnerships, it is making explicit the use of ODA to support Japanese private investments and operations overseas. Of course, all ODA is largely ‘donor-led’, and an appreciation of this would lead to the logical conclusion that ODA disbursals involve self-benefit on behalf of the donor. While public-private partnerships in ODA are now much more acceptable, Japan has long been criticized for using ODA in such a way. In line with the critique of Japan’s neo-mercantile foreign policies during the Cold War, Japan’s ODA was described as ‘seed money’; public investments used to capture markets and nurture dependence on Japanese products and technology. According to this argument, ODA is a kind of subsidy for Japanese exports. Indeed, it may be that OSA grants for defense equipment and infrastructure may work in a similar manner. While the initial grant for equipment would be a ‘gift’, such equipment would require maintenance and upgrading which would necessitate contracts with the Japanese suppliers.

The dramatic increases in Japan’s defense budget, the smaller increases in Japan’s ODA budget, and the creation of the new OSA mechanism for providing defense-related assistance to allies, can all be seen as attempts by Japan to play a more active role in regional security. It must therefore be the case, that the government of Japan thinks such a role is necessary. It could be that Japan is merely responding to pressure from the US to take on such a role. However, it could also be that there is a perception within the Japanese government that the ability of the US to maintain its pre-eminent position as the “world’s policeman” is greatly diminished. Either way, the government of Japan has clearly stated that it perceives threats to the international order to be of such a magnitude that Japan has no choice but to take on a more active role.