Interest rate on Japanese loans reaches an all-time high of 2%, staying below rates elsewhere.
In a notable development, the interest rates on Japanese loans to Bangladesh have been on an upward trajectory since the current financial year (FY26), rising from 1.7% in November 2025 to 2% by June 2025. This marks a significant shift from historically low rates under 1% in 2022.
The reasons for this increase include global revisions every six months based on procurement costs and inflation trends, as well as Japan's biannual reviews of interest rates, considering both the country's domestic economic conditions and Bangladesh’s Gross National Income (GNI).
Project loans are disbursed in multiple tranches, with interest rates tending to rise over time. For instance, the Matarbari power project, which received a loan in October 2023, saw its interest rate climb from 0.65% in 2021 to 1.95% in 2025.
Despite the increase, Japanese loan rates remain relatively favorable compared to other development partners. Japan still offers competitive terms reflecting Bangladesh's status as a Least Developed Country, and Japanese loans often come with long repayment periods (e.g., 30 years with a 10-year grace period for the $630 million railway loan) and concessional terms such as low front-end fees.
In comparison to others, the current 2% rate is nearing the range of other development partners’ rates but still remains among the more affordable options for Bangladesh. Here's a summary of the key differences:
| Aspect | Japanese Loans to Bangladesh | Other Development Partners | |-------------------------------|----------------------------------------|----------------------------| | Interest Rate Trend | Increased from 1.7% to 2% since FY26 | Similar or slightly higher | | Historical Rates | Under 1% before FY26 | Generally higher | | Review Frequency | Biannual (April, October) | Varies | | Repayment Terms | Up to 30 years with grace periods | Varies | | Concessional Features | Lower front-end fees, occasional loan forgiveness | Less common |
Japan's continued commitment includes substantial funding for infrastructure projects, such as the $630 million loan for dual-gauge railway expansion, supporting Bangladesh's development priorities across transport, energy, health, and education sectors.
Ichiguchi Tomohide, Chief Representative of JICA Bangladesh, stated that interest rates are revised globally every six months based on procurement costs and inflation trends. The rise in Japanese loan interest rates reflects broader economic factors and global inflation, but Japan remains a key, relatively low-cost development partner for Bangladesh.
- The rise in Japanese loan interest rates is not isolated to Bangladesh, as Ichiguchi Tomohide, Chief Representative of JICA Bangladesh, mentioned that interest rates are globally revised every six months, considering procurement costs and inflation trends.
- In the realm of business and personal finance, Japanese loans remain relatively favorable compared to other development partners, offering competitive terms, long repayment periods, and concessional features.
- The wealth-management industry recognizes Japan's continued commitment towards Bangladesh, with substantial funding directed towards infrastructure projects, such as the dual-gauge railway expansion and other sectors like transport, energy, health, and education.
- In the finance and investing domain, comparing Japanese loans to Bangladesh with other development partners reveals differences in key aspects, such as interest rate trends, historical rates, review frequency, repayment terms, and concessional features. Although the current 2% rate is nearing the range of other development partners, it still remains among the more affordable options for Bangladesh.
