Japan to Decide Defense Tax Hike Timing Flexibly, Minister Says

2023-06-13 11:46

Japan will flexibly decide when to begin raising taxes to cover a major increase in defense spending, the

Japan will flexibly decide when to begin raising taxes to cover a major increase in defense spending, the finance minister said, in comments that could take on extra weight if the premier calls for an early election.

“We will work closely with the ruling parties to flexibly decide the timing of the tax hikes,” Shunichi Suzuki told reporters Tuesday. He was referring to a proposal submitted by a special committee of the ruling Liberal Democratic Party that recommended considering non-tax revenue to fund the increased defense spending, while postponing the start date of the tax hike.

The government is expected to tread carefully when it comes to mentioning tax hikes that could turn off voters as speculation mounts Prime Minister Fumio Kishida is looking to call a general election as soon as July to solidify his grip on power.

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Japan has set 6.8 trillion yen ($48.8 billion) for defense spending in this fiscal year, jumping from last year’s 5.4 trillion yen. The defense costs, which will account for around 6% of the total expenditures, have been at the center of debate by the ruling party.

Spooked by Russia’s war on Ukraine, Kishida has pledged to increase defense spending by about 60% over the next five years, saying he may ask the public to bear the burden of up to one trillion yen a year of the increased spending.

Separately, the Japanese government plans to include a reference in its new economic and fiscal policy plan to possibly raise taxes from 2025 or later to help fund the increased defense spending, the Nikkei newspaper reported, citing a briefing by officials to ruling coalition lawmakers.

Suzuki said the government would decide on the timing based on the framework approved by the cabinet late last year, when it decided that the tax hike should be implemented at an appropriate time from the fiscal year 2024 and onward.

Suzuki emphasized that even if taxes are raised in the fiscal year 2025, later than the year stated in the earlier decision, it will be within the decided timing.