Funding for Japan’s increased defense spending responsibility of politicians

The Yomiuri Shimbun

15:08 JST, November 23, 2022

Talks by an expert panel on the country’s defense did not go into the specifics of raising taxes to fund increased defense spending, only calling for discussions on the matter as the responsibility of politicians.

One of the focal points of the experts’ discussions, conducted before the panel handed its defense proposal to Prime Minister Fumio Kishida on Tuesday, was how to pay for greater defense spending. The Finance Ministry aims to raise taxes and was laying the groundwork for having corporate tax included in the panel’s report as an example of a tax to be raised.

The experts were cautious, however, because they believe the government should take the lead in discussing taxes, which directly affect the people. The government also must seek the public’s understanding.

The report called on the government and the ruling parties to explain to the people that public cooperation is indispensable and make efforts to gain their understanding. The report did not mention specific tax items.

“It’s important to consider a wide range of tax items rather than deciding on a specific tax now,” said Kenichiro Sasae, who chairs the panel.

The experts shared the recognition that securing stable financial resources is fundamental because defense spending is a permanent expense. Thus, excessive reliance on the issuance of government bonds could reduce financial reserves in the event of a contingency that requires the procurement of a large amount of funds.

The government and the ruling parties plan to discuss increasing corporate and income taxes, which generate a large amount of tax revenue, as a stable source of funding in the future. In light of the severe economic situation, the most likely plan for the time being is to issue government bonds.

Discussions of financial resources to fund increased defense spending will move to the ruling parties’ tax research panels and an ultimate decision will be left to the prime minister. It will not be easy to proceed with the important issues — strengthening the country’s defense capabilities and securing financial resources — while gaining the understanding of the people.

“The prime minister faces a critical moment as to whether he can demonstrate leadership,” said a Liberal Democratic Party member and former cabinet minister.