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The Finance Ministry will cut outlays for Japan’s official development assistance in the fiscal 2004 budget for the fifth straight year, ministry sources said Monday.

Japan must come up with the funds it pledged for the reconstruction of Iraq, and plans to trim ODA to other countries to achieve what is expected to be a small-scale overall reduction, the sources said.

As part of that plan, the government is expected to reduce low-interest yen loans to China, which constitute the major pillar of Japan’s assistance to the country, by about 20 percent, the sources said.

The nation’s debt-ridden finances have prompted calls for cuts in overall foreign aid, but the Foreign Ministry is wary of making a reduction, saying it would weaken Tokyo’s international influence.

In fiscal 2003, the ODA budget was cut by 5.8 percent from a year earlier to 857.8 billion yen. The amount was down 30 percent from fiscal 1997, before the government began reducing the budget for foreign aid.

Japan has pledged $1.5 billion, or 165 billion yen, in 2004 for the reconstruction of Iraq. The government plans to use ODA funds in the fiscal 2003 and 2004 budgets for the reconstruction money.

When considering the amount of leftover funds in fiscal 2003, the government would have to come up with several dozen billion yen for Iraq in the fiscal 2004 budget.

To do so, the Finance Ministry might cut ODA funds for other countries by postponing until fiscal 2005 the implementation of some ODA-funded projects.

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