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Wednesday, June 7, 2006

China detente spells 74 billion yen in loans

Freeze lifted but lending will end by '08


Staff writer

Reflecting the recent detente between Japan and China, the government said Tuesday it will extend 74 billion yen to Beijing, lifting its freeze on low-interest yen loans for the fiscal year that ended March 31.

Tokyo had suspended the disbursement amid the deterioration in bilateral ties. Relations between the two neighbors had been damaged by various disputes, including Prime Minister Junichiro Koizumi's repeated visits to Yasukuni Shrine and over territorial rights and energy resource development in the East China Sea.

Even without the recent tensions, calls had been mounting in Japan for an end to the loans in light of such factors as China's economic rise, its huge military spending and its manned space program.

On Tuesday, a top decision-making panel on foreign aid strategy that consists of Cabinet ministers authorized the low-interest loans worth 74 billion yen, which is down from the 85.9 billion yen in fresh loans Tokyo extended the previous fiscal year, Chief Cabinet Secretary Shinzo Abe said.

The two countries have already agreed that Japan will phase out new loans by the time China hosts the Beijing Olympics in 2008.

"We made the decision (to resume the loans) based on an overall judgment," including the state of bilateral relations and regional stability, the top government spokesman told a regular news conference.

"We confirmed that it is important to consider financial aid, technological support and international finance to China more strategically, based on our country's interests," he said.

He added that the loans will in principle be focused on environmental projects, including improved use of water and energy resources.

The Cabinet usually approves yen loans during the fiscal year they are earmarked for. However, the procedure was put on ice in fiscal 2005 due to the frigid relations with China. The Cabinet is expected to formally approve the loans this week.

Lifting the freeze is widely seen as a move to help ties thaw. It comes after Foreign Minister Taro Aso and Chinese Foreign Minister Li Zhaoxing agreed last month during a meeting in Qatar to promote bilateral exchanges in economic, defense and other areas. It was the first time in about a year the foreign ministers of the two countries met.

At the same panel meeting Tuesday, the ministers also confirmed that the government will actively support the newly created government in Iraq by extending financial aid.



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