Japanese garment retailers and brands want the continuation of duty-free market access to Bangladesh after the latter's graduation from least developed country (LDC) status in 2026, Japanese Ambassador to Bangladesh Iwama Kiminori said yesterday.

Riding on duty-free facilities, Bangladesh's garment shipments to Japan grew by 45 percent to $1.6 billion year-on-year in the last calendar year and Japanese retailers expressed their desire to continue duty-free market access between the nations beyond 2026, Kiminori said.

The Economic Partnership Agreement (EPA) between Bangladesh and Japan, the terms of which are still being negotiated, includes not only tariff benefit, but also services, investment, trade customs procedures, trade facilitation, and price competition, he said.

So far, three rounds of meetings have been held between the two countries for the signing of the EPA, designed mainly to retain duty-free trade before the cut-off time of Bangladesh's LDC graduation in November 2026.

The signing of the EPA will deepen bilateral trade relations and also deepen regional and global trade but since it is at a premature stage, the exact amount of trade benefits for both countries if the deal is signed cannot be pinpointed.

The Japanese envoy was speaking at the announcement of the EPA joint study group (JSG) report at the commerce ministry office in Dhaka.

While announcing the joint study report, Senior Commerce Secretary Tapan Kanti Ghosh said both countries targeted to complete the signing of the EPA by December 2025 or June 2026.

As the extended period of LDC status for Bangladesh will come to an end on November 24, 2026 and Japan has no grace period like the European Union (EU), Ghosh said the signing of the EPA was mandatory if Bangladesh and Japan wanted to enjoy duty-free trade facilities beyond 2026.

"I am very much hopeful that the EPA will be signed between the two countries. This is the first time Bangladesh is negotiating the signing of a full-fledged trade deal with a country like Japan, which offers great potential to Bangladesh," Ghosh said.

Bangladesh's export to Japan amounted to $1,901.60 million during FY2022-23 and import from Japan stood at $2,020.90 million during the same period, according to Ghosh.

Although, the balance of trade is tilted towards Japan, there are areas of common interest where the nations can cooperate for mutual benefit, he added.

The JSG identified 17 facets in scope and coverage in negotiating the proposed EPA, such as trade in goods, technical barriers to trade, improvement of business environment, labour, environment and transparency.

Additionally, there is huge demand for investment in the Japanese Special Economic Zone at Narayanganj's Araihazar upazila

The Japanese economic zone is expected to draw investments amounting to over $1.5 billion once it goes into full operation and generate employment for over one lakh people initially.

Bangladesh's garment export to Japan got a boost in January of 2011, when the Japanese government removed tariff barriers from knitwear imports originating in an LDC.

One of the characteristics of the bilateral trade structure between Bangladesh and Japan is that imports from Japan to Bangladesh are mainly industrial products such as steel, machinery, and automobiles, while imports from Bangladesh to Japan are mainly textiles and textile articles.

According to Bangladesh Bank, in FY2021-22, Japan was Bangladesh's 12th largest trading partner in exports (with a share of 2.3 percent) and 7th largest trading partner in imports (with a share of 3.2 percent).

In the past, Japanese trading companies and construction companies have entered Bangladesh. About 15 years ago, textile and logistics industries began to expand into Bangladesh due to its abundant and inexpensive labour force.

Foreign direct investment (FDI) from Japan to Bangladesh in FY2022 reached the largest ever amount recorded, hitting $122.72 million. It was $49.87 million in FY 2021.

The FDI stock from Japan in December 2022 stood at $675.69 million.

In addition, the number of Japanese companies operating in Bangladesh has tripled over the past decade, rising to 302 in 2022, according to the joint study.