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File photo: Indonesian models view scale models of Chinese-made bullet trains on exhibition at a shopping mall in Jakarta.

Japan has lost a key Indonesian high-speed railway contract to China, dealing a heavy blow to Prime Minister Shinzo Abe who is seeking to take advantage of infrastructure exports for economic growth.

Sofyan Djalil, head of the Indonesian National Development Planning Agency, told Japanese Chief Cabinet Secretary Yoshihide Suga on Tuesday that Indonesia planned to accept the Chinese proposal. Suga later commented on this matter, describing it as “difficult to understand” and “extremely regrettable”.

Indonesia has been planning bullet train line with only China and Japan entered the bid. In the beginning of September this year, Indonesia turned down both proposals from China and Japan, saying it would build a medium-speed railway instead. The railway is to link Jakarta with the West Java provincial capital of Bandung.

China later came back with a new proposal, offering to build the high-speed railway without Indonesian fiscal spending or debt guarantee. Teten Masduki, the Indonesian president’s chief of staff, told reporters in Jakarta that Japan lost because its proposal was more about government-to-government cooperation, while Jakarta preferred business-to-business cooperation, reported the Japan Times.

The railway project is estimated to cost nearly $ 5.3 billion.