I Geo-Economics & ChokepointsSouth Asia
Shanghai institute says Japan's weight in Bangladesh is not becoming strategic influence
- Institution
- Şanghay Uluslararası Çalışmalar Enstitüsü (SIIS)
- Author
- Wu Mengke
- Country · language
- China · Chinese
- Affiliation
- State-affiliated think tank
Summary
SIIS researcher Wu Mengke examines Bangladeshi Prime Minister Tarique Rahman's visit to Tokyo on 26–29 October. The piece first appeared on a WeChat channel focused on the Lancang-Mekong region, and SIIS republished it on its own website on 6 November. During the visit, the Bay of Bengal Industrial Growth Belt, a port and industrial zone plan proposed by the Abe government in 2014, was upgraded to a new strategic cooperation framework on 27 October. Japan pledged loans of 46.56 billion yen, and the two sides signed 17 corporate memoranda. Tokyo expects Japanese companies to invest 1 trillion yen over 5 years and create about 200,000 jobs.
The author acknowledges Japan's weight in figures. Bangladeshi Finance Ministry data show cumulative Japanese disbursements of $23.95 billion by June 2025, 16.8% of all foreign aid received since independence and the largest among bilateral donors. Of the state's external debt, $13.73 billion, or 17.8%, is owed to Japan. Since 2002 the Japan Development Scholarship has taken 623 civil servants to Japan for master's and doctoral studies.
Wu's thesis is that this weight is not turning into strategic influence, for three reasons. The first is security: since the 2024 change of government Dhaka sees India as its main threat, while Tokyo regards New Delhi as a key partner. The second is industry: central bank data put the Japanese direct investment stock at about $470 million at the end of 2025, against $1.92 billion for China. China supplies 27% of Bangladesh's imports, Japan 2.8%. The third is financing: JICA's fixed rate rose from 0.7% in 2020 to 3.5% in October 2026. That rise led Dhaka to temporarily postpone signing new loans.
Blind spot
In listing Japan's limits, the piece never asks whether China runs into the same ones. China's 27% share of imports also creates dependence, but how that is perceived in Dhaka goes undiscussed. It treats Japan's higher borrowing costs as permanent. It rests the reading of India as a threat on a single change of government. It offers no source for the claim that the Matarbari port would become a tool of Indian influence.
Talay assessment
Bottom line
This state-affiliated Shanghai institution argues that financing competition in the Bay of Bengal has hit an interest rate constraint. With JICA's rate up from 0.7% to 3.5%, Japan's strongest tool has weakened. That relatively enlarges China's edge in trade and investment. Even so, the 1 trillion yen investment target and 46.56 billion yen of new loans show Tokyo is not pulling back. The most likely path is that Dhaka forces both sides to bargain over rates and maturities.
Likely effects
- Development financeNegative1–6 months
As the cost of Japanese concessional loans rises to 3.5%, borrowers such as Bangladesh are postponing new deals and bargaining for extended maturities and lower rates.
- Bay of Bengal trade routesUncertain6 months+
If the Matarbari deep-sea port and industrial belt advance, they would create an outlet linking north-east India to the sea; Dhaka's suspicion of India could slow that timetable.
- China's regional shareUncertain1–6 months
China's position, with 27% of imports and a $1.92 billion investment stock, strengthens in relative terms as Japanese financing grows costlier.
Possibilities, ranked
- 1Dhaka forces both sides to bargain55%
Bangladesh seeks Japanese loans again on extended maturities and lower rates, while preserving its trade and investment ties with China.
Watch: Rate and maturity terms of new JICA loans and the signing date of the 46.56 billion yen loan
- 2Japan softens its terms30%
Tokyo cuts rates or raises the grant component to protect its strategic share; the Matarbari and metro projects stay on schedule.
Watch: A JICA announcement of special rate or maturity arrangements for Bangladesh
- 3Chinese finance fills the gap15%
Dhaka turns to Chinese infrastructure finance in place of postponed Japanese loans, and partners change on port projects.
Watch: Bangladesh signing a new port or energy loan with China
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Original publication: siis.org.cn · 8 November 2026
This page summarises the institution's view and does not reflect the view of Talay Insight. No direct quotation is used.