Tokyo will waive most of the $4 billion Iraq owes Japan. The announcement comes after talks between U.S. special envoy James Baker and Prime Minister Junichiro Koizumi.
Japan, a major Iraqi creditor, has pledged to forgive the "vast majority" of its Iraq debt on the condition that other nations from the Paris Club do the same. Iraq owes Japan $4 billion, but Tokyo says late payment charges bring the total above $7 billion.
The Paris Club is a group of creditor nations that includes Russia, Australia, the United States, Sweden and others. Iraq owes it more than $40 billion.
After a meeting between Prime Minister Junichiro Koizumi and special U.S. envoy James Baker, the Japanese government said that more discussion is needed to work out the precise figures for cutting Iraq's debts. It also says it is committed to ensuring that the Iraqi people have a chance to build a free and prosperous nation following the U.S.-led ouster of Saddam Hussein.
Mr. Baker, who has been traveling the world to win support on the debt waiver issue, said his meeting with Mr. Koizumi was a success. "I think we made some very, very good progress on the very important issue of Iraq's debt and the role that that plays in the ultimate reconstruction of the country," he said. "Prime Minister Koizumi and Japan have taken a leadership role in the reconstruction of Iraq - something that is extraordinarily important, and for which the United States is very grateful."
Japan's pledge on debt relief comes days after the first Japanese troops headed to the Middle East to assist with Iraq's reconstruction. A few dozen Air Force members went to Qatar and Kuwait on Friday to prepare for a larger deployment next year that will offer non-combat support to the rebuilding effort. Japan's pacifist constitution bans its troops from taking part in combat to resolve international conflicts.
Japan, a key U.S. ally, has already pledged $5 billion in grants and low-interest loans to Baghdad over the next four years. Its contributions to Iraq come as Japan struggles with its own financial woes. It has suffered through three recessions in a decade and has its own massive government debts - the highest among the world's most industrialized nations.