The Type 98 Ke-Ni was the planned successor to the Type 95 Ha-Go light tank, a design that despite being highly capable by pre-war standards, was increasingly obsolete by the time World War II began. The Ke-Ni solved many of the deficiencies of its predecessor, notably, by increasing its armor thickness and featuring all welded construction of improved shape. A more powerful engine was also provided, and was located sideways to facilitate maintenance. The turret was a two-man design, which relieved the workload for the commander, and mounted a more advanced Type 100 37-mm gun. Suspension was of a bell crank type Despite these improvements, production of the Ke-Ni was delayed significantly until World War II had begun, and as a result, only a small number were built due to the priority afforded to warship and aircraft construction by Japan's military authorities. Because of this, the obsolete Ha-Go remained the most numerous Japanese armored fighting vehicle during the war.

The Type 98 prototype was developed in 1938 and built the following year but production did not start until 1942. An improved version, known as the Type 2 Ke-To was also built in small numbers, this retaining the basic hull but with a larger gun turret mounting a more powerful Type 1 37-mm gun. Nevertheless, it was not used in combat.