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Japan can meet domestic and international challenges to its aid policies by developing a coherent national strategy for official development assistance, broadly designed to enhance partnership, effectiveness, accountability, and transparency. Japan remains the world's largest national donor of aid funds. But the Japanese government, facing prolonged economic stagnation and mounting public sector debt, is under increasing public pressure to reduce aid budgets and to use official development assistance in more explicit pursuit of Japan's own economic and political interests. Internationally, Japan continues to attract criticism for its emphasis on infrastructure projects and its limited willingness to participate in multilateral partnerships. Kawai and Takagi argue that Japan can meet these domestic and international challenges by developing a coherent national strategy for official development assistance, broadly designed to enhance effectiveness, accountability, and transparency. This paper-a product of the Office of the Chief Economist, East Asia and Pacific Region-is part of a larger effort in the region to study financial market development, capital flows, and exchange rate arrangements in East Asia. The authors may be contacted at kawai@iss.u-tokyo.ac.jp or takagi@econ.osaka-u.ac.jp.

Economic assistance, Domestic.