Japan May Forgo Most Iraqi Debt

Japan is willing to forgive the “vast majority” of its Iraqi debt if other Paris Club creditor nations do the same, the Foreign Ministry said in a statement today during a visit by U.S. envoy James A. Baker III.

Iraq owes Japan $4.1 billion along with another $3.5 billion in penalty fees. The United States has been encouraging creditors to assist Iraq by relieving part of its crushing debt.

Baker, who has already won agreements on Iraqi debt relief from Germany, France and Russia during visits to those countries, met today with Japanese Prime Minister Junichiro Koizumi.

Afterward, the Foreign Ministry issued a statement saying that Japan would be “prepared to eliminate the vast majority of its Iraqi debt if other Paris Club creditors are prepared to do so.” The statement did not specify an amount, nor did it say whether the “majority” referred to the principal amount owed to it by Iraq or the total debt.

Tokyo has been reluctant to relieve Iraqi debt, in part because it is already contributing substantial amounts to Iraqi reconstruction. Japan is providing a $5-billion package and sending 1,000 troops on a humanitarian mission to the country.

The 19-nation Paris Club, which includes the United States, Germany and Russia, is owed more than $40 billion by Iraq, while Arab countries are owed at least $80 billion.