Despite being the world’s "number 2" aid donor, Japan often seems misunderstood and marginalized. But it is approaching a turning point in its aid policy towards Africa. After years of drift, Japan is starting to re-engage with African development in a significant way. What will be the Japanese package for Africa at the G8 Gleneagles? What are the implications in the longer term?

There is good news for the Four B’s – Blair, Brown, Bono and Bob (Geldof):

• Japan’s Prime Minister announced that Japan would double its aid to Africa (to US$1.6 billion) over the next three years.

• Japan joined the debt relief initiative – this was a major achievement for Brown given Japan’s reluctance in the past.

• Japan welcomes the Commission for Africa emphasis on the productive sector – especially infrastructure – as areas where Japan has particular expertise.

• There has been recent institutional reform and Japan is considering and trying new approaches to make aid more effective (eg harmonisation and budget support).

• Japan is taking the politics of its aid more seriously.

Why is all this interesting? We need some alternative voices. Japan’s approach is based on its philosophy of ‘self-help’ and is also based on its successful experience as a donor, primarily to East Asia. And Japan has experience in supporting the private sector, which has been "rediscovered" in 2005 by the donor community. There is a lot Japan can contribute to the discussion.

But let’s not get carried away. Consider the following:

• Japan’s aid to Africa halved between 1996 and 2003 – and fell further in 2004. The announcement to double aid will only bring amounts back to levels they were at 10 years ago.

• The Japan Bank for International Cooperation (JBIC) – Japan’s loan arm – now receives more in repayments from Africa than it gives in disbursements.

• Japan’s weak fiscal situation limits the scope for future increases – more aid to Africa is likely to be reallocations from Asia (at least partly) rather than new money.

• Japan is very sceptical about the International Finance Facility (IFF) and there is little scope for progress on trade liberalization.

• Japan still ties its ODA grants to Japanese contractors. Japan’s economic and commercial interests have always had an influence on its aid programme.

• Aid is seen as an instrument of diplomacy – the Ministry of Foreign Affairs plays the key role and is currently eying a permanent seat on the UN Security Council.

• Africa is geographically distant from Japan – the public ask ‘why Africa?’

So the development community should not be surprised by the limited room for manoeuvre caused by Japan’s fiscal situation and the internal politics of aid.

Looking forward, Japan is going to be in a somewhat similar position in 2008 to the UK’s position now. In 2008, Japan will chair the G8 Summit and host the Fourth Tokyo International Conference on African Development (TICAD IV). Africa may or may not be an explicit priority at the G8, but the development performance in the region and Japan’s aid to Africa are bound to be under the spotlight again.

For now – the bottom line is that more aid for Africa and more effective aid from the number 2 donor is a pretty big deal.

For more on ODI work on Japan's Aid Policy, see: http://www.odi.org.uk/rapid/Projects/UK_Japan/index.html