Japanese Two Step Loans: The Japanese Approach to Development Finance

Recently, there has been a lot of contraversy over Japanese Two Steps Loans (TSLs) provided by the Overseas Economic Cooperation Fund between the World Bank and Japanese adrninistrative agencies. The purpose of this paper, is to examine the validity of the "Japanese approach" to development assistance using Japanese TSLS as an example. First, the experiences of the OECF's TSL is overviewed and the characteristics of Japanese TSLS are identified. Secondly, the problems of Japanese TSLS pointed out by the World Bank are summarized. Thirdly, I will try to justify the validity of Japanese TSLS based on the Japanese approach to development assistace. Finally, the effectiveness of BAAC Ioans provided by the OECF is evaluated as a case study of Japanese TSLs.