Abstract
Official Development Assistance has been the most important instrument of Japan's foreign policy towards China since 1979 and has been useful in softening many difficulties in the bilateral relationship. Most of Japan's ODA to China consists of yen loans. Usually the Japanese government adheres to certain economic indicators set by the international banking institutions in order to phase out ODA programmes. However, in 2005 the Japanese government decided abruptly without applying the usual guidelines to end its loan aid to China by 2008, the year China will stage the Olympic Games. The article concludes that the decision was taken for political reasons, taking into consideration the criticism of certain Chinese policies, the deterioration of Japan's relations with China, the fast economic development of China with its implications for Japan's interests, and a general aid fatigue of public opinion against the backdrop of Japan's economic and budgetary problems. The process leading to this decision throws an additional light on all the complexities of the bilateral relationship, including the historical legacy.
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