Japan Postpones Decision on Tax Increase Aimed at Strengthening Nation’s Defense Capabilities

Yomiuri Shimbun file photo
Yoichi Miyazawa, chairperson of the LDP’s Research Commission on the Tax System, is seen at the party headquarters in Tokyo in October 2023.

The government and ruling parties intend to postpone the decision on when to introduce higher taxes aimed at drastically strengthening the nation’s defense capabilities, with the hike likely to come in 2026 or later.

Speaking to reporters on Monday, Yoichi Miyazawa, chairperson of the ruling Liberal Democratic Party’s Research Commission on the Tax System, said, “In light of the current political situation, it would be tough to decide [on the tax increase] this year.”

The decision to defer comes amid mounting criticism of the LDP’s involvement in a political funds scandal, which has made it difficult to press ahead with the debate on the tax increase.

“We’ll decide next year about when to start the increase, and secure financial resources that exceed ¥1 trillion in 2026 and 2027,” Miyazawa said.

It will be difficult for the ruling camp to specify when to start the tax increase in its tax reform outline for fiscal 2024, which is to be compiled within the week. It is likely that the ruling parties will merely include its intention to raise the tax on tobacco in the outline.

In the tax reform outline approved by the Cabinet at the end of last year, it was decided that income, corporate and tobacco taxes would be increased in stages by fiscal 2027 to secure financial resources.

Of these three taxes, the government expects to raise about ¥200 billion in tax revenues by raising the tax on individual cigarettes by about ¥3. Currently, the tax rate for heated tobacco is lower than that of cigarettes. The ruling parties are considering setting both rates to the same level.