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Japan to delay 2005/06 China loan decision

Written by: Staff
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TOKYO, Mar 23 (Reuters) In a sign of Tokyo's strained ties with Beijing, Japan said today it would postpone a decision on fresh yen loans to China until after the current fiscal year ends on March 31.

A Foreign Ministry spokesman said, however, that the delay did not mean Japan was cutting off or freezing aid to China.

''We will put off making a decision on yen loans for this fiscal year to China...because of various situations surrounding Sino-Japanese relations at this time,'' Chief Cabinet Secretary Shinzo Abe told a news conference.

''The government needs more time to work on it,'' Abe said.

Sino-Japanese relations have chilled markedly since Prime Minister Junichiro Koizumi took office in 2001 and began annual visits to Tokyo's Yasukuni shrine, seen by critics as a symbol of Japan's past militarism because convicted war criminals are honoured there along with the nation's 2.5 million war dead.

Ties are also strained by competition over energy resources in disputed areas of the East China Sea, rivalry for regional dominance and mutual suspicion over military ambitions.

Abe added, however, that there was ''no change in our policy to proceed with this (new yen loans) based on future-oriented Sino-Japanese relations.'' Japan has scaled back low-interest loans to a booming China in recent years and has already decided to halt fresh yen loans to China by the time of the Beijing Olympics in 2008.

Officials have long pointed to a need for China, with its robust economic growth, to ''graduate'' from reliance on the aid.

The government decides the size of its total aid budget before the start of each fiscal year in April but does not finalise a breakdown until the end of the year.

''We have not exchanged notes for fiscal 2005, but this does not mean that the money flow itself will be stopped,'' said Foreign Ministry deputy spokesman Tomohiko Taniguchi, adding there had been disagreement within Japan over the amount and timing of the loans.

Loans for large projects are often disbursed over several years.

Japanese lawmakers have complained in the past that Beijing has not been sufficiently grateful for the aid, and expressed concern that China was funnelling the funds to its military programme.

Japan decided in March 2005 to extend about 85.9 billion yen (735 million dollars) worth of loans, bringing its total loan aid to China to more than 3 trillion yen since 1979.

REUTERS SK SP1008

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