Recently, there has been a lot of contraversy over Japanese Two Steps
Loans (TSLs) provided by the Overseas Economic Cooperation Fund betwee
n the World Bank and Japanese administrative 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 t
o development assistace. Finally, the effectiveness of BAAC loans prov
ided by the OECF is evaluated as a case study of Japanese TSLs.