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North Korea has failed to pay interest on rice-related loans provided by Japan and may even fail to repay the original principal, it was learned Sunday.

Interest on the 5.6 billion yen in loans, extended in fiscal 1995, runs to some 800 million yen.

The government-run Food Agency has sent about 70 letters urging Pyongyang to pay the debts but has not received any response, sources said.

Experts say the case, combined with Pyongyang’s nuclear weapons program and its abductions of Japanese nationals in the late 1970s and 1980s, may be another obstacle hindering negotiations on establishing bilateral diplomatic ties.

The administration of Prime Minister Tomiichi Murayama in June 1995 decided to help North Korea cope with a food shortage. This was considered an unconventional move as the countries had no diplomatic ties.

According to the sources, the Japanese government gave North Korea 500,000 tons of rice via the Japanese Red Cross Society in fiscal 1995. Of this, 150,000 tons, worth 2.4 billion yen, were given as free aid, and 350,000 tons were provided as soft loans under a 30-year loan contract with a 10-year grace period.

The interest rate was set at 2 percent for the grace period and 3 percent for the remaining years. The countries agreed that the principal repayment would also be made during the remaining period.

North Korea paid some 80 million yen in interest in fiscal 1996 but has since failed to make payments. As of the end of December, some 800 million yen in unpaid bills had racked up.

The total loan amount plus interest will be 8.4 billion yen — 2.8 billion yen in interest plus the principal of 5.6 billion yen.

Japan also offered 67,000 tons of rice in 1997 and some 600,000 tons in 2000 to Pyongyang as free aid, according to the Japanese government.

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