Japan remains the world's largest national donor of aid its limited willingness to participate in multilateral funds But the Japanese government, facing prolonged partnerships. economic stagnation and mounting public sector debt, is Kawai and Takagi argue that Japan can meet these under increasing public pressure to reduce aid budgets domestic and international challenges by developing a and to use official development assistance in more coherent national strategy for official development explcit pursuit of Japan's own economic and political assistance, broadly designed to enhance effectivteness, interests. Internationally, Japan continues to attract accountability, and transparency. criticism for its emphasis on infrastructure projects and This paper-a product of the Office of the Chief Economist, East Asia and Pacific Region-is part of a larger effort in the regioni to study financial market development, capital flows, and exchange rate arrangements in East Asia. Copies of the paper are available free from the World Bank,