The state-owned JBIC signed the loan agreement for $1.99 billion with private banks including Mizuho Bank, Sumitomo Mitsui Trust Bank, MUFG Bank, Overseas-Chinese Banking Corp, DBS Bank and the Bank of China, the bank said in a statement late on Friday.
The loan breaches an agreement signed in 2015 by members of the Organization of Economic Co-operation and Development including Japan to restrict state-backed financing for dirtier coal plants, said Market Forces.
"Van Phong 1 plans to use supercritical boiler technology, which is not allowed under the OECD sector understanding on coal power stations," Market Forces said in a statement.
A JBIC spokesman on Monday said "this project is still in line with the transitional arrangements of the OECD guidelines."
Japanese banks and investors are starting to restrict financing of coal but are still finding ways to support projects.
OCBC and DBS last week announced they would stop financing coal power but would complete existing commitments first, including the Van Phong station, according to media reports.
NGOs including Market Forces and 350.org have in recent weeks taken out full-page advertisements in the Financial Times criticising Japan's support for coal.
The Van Phong project will be nine times more polluting than the average Japanese coal plant, according to the Market Forces release, which cited an environment and social impact assessment.
Burning coal releases huge amounts of carbon dioxide, one of the gases blamed for global warming.
A landmark United Nations report on climate change said last year that keeping the earth's temperature rise to a 1.5 degrees C (2.7 degrees F) target would require "unprecedented" changes to how society consumes energy, travels and builds.
Coal will account for 53 percent of the power generated in Vietnam by 2030, according to its trade ministry.
Vietnam's coal imports in the first quarter this year rose 150 percent from a year earlier to 9.4 million tonnes, according to government's customs data.
Indonesia supplied 40 percent of the coal shipments, while 30 percent came from Australia and the rest from Russia and Malaysia.
(Reporting by Aaron Sheldrick in TOKYO and Khanh Vu in HANOI; Editing by Shreejay Sinha)