Japan originally loaned the money to Honduras to fund public works and develop projects.
"The money will be used to reduce poverty in Honduras," said Japan's Ambassador to Tegucigalpa, Takashi Koezuka.
"We are very grateful for Japan's gesture," Elias Lizardo, an adviser to Honduran President Ricardo Maduro, told reporters.
Japan was also part of a group of creditor nations known as the Paris Club that pardoned another US$1.06 billion (Ђ900 million) in Honduran debts in May.
Seventy percent of Honduras' 7 million inhabitants live in poverty. It is one of the poorest countries in the Western Hemisphere, reported AP. P.T.