Japan should be "more selective" in its disbursement of yen-denominated loans by screening the recipient countries for their ability to use them, according to a Foreign Ministry report released Tuesday.

The report, compiled by the ministry's in-house advisory panel on yen loans, was submitted to Foreign Minister Yohei Kono the same day.

The report recommends basic directions for distributing Japan's yen loans and emphasizes the need to improve their "effectiveness" and "efficiency."

Yen-denominated loans are the main pillar of Japan's official development assistance program, which also provides grants-in-aid and technical assistance.

In response to recent public calls for ODA to be streamlined, the report stresses that it is important for the government to complete feasibility studies before disbursing yen loans and examine the ability of the benefiting countries to use them properly.

Only recipient countries that can make the most of Japan's assistance should become eligible for additional loans, the report says.

It also urges the Foreign Ministry to review the list of yen-loan recipients regularly in accordance with the countries' level of development.

To satisfy the various needs of aid recipients, Japan's yen loans should be directed to projects in new areas, such as building information technology infrastructure in developing countries, the report says.

The benefits of Japan's yen loans should directly reach the socially weak in recipient countries, the report adds, urging the ministry to also verify this point as part of the screening process.

The panel was launched in January to improve the government's yen-loan program.