Japan postpones tax hike meant to cover higher defence spending
- The government is likely to forgo a specific tax increase when it compiles the budget for fiscal 2023 at the end of December
- It will continue to mull ways to obtain a stable revenue source, after PM Fumio Kishida called to raise defence spending to 2 per cent in fiscal 2027
The government will set the general direction of the plan but is likely to forego deciding on a specific tax increase when it compiles the initial budget for fiscal 2023 in late December, the source said.
What is behind pacifist Japan’s policy change to allow heavy arms exports?
It intends to prioritise cutting non-defence outlays because some Liberal Democratic Party (LDP) lawmakers oppose raising taxes that would directly hit consumers and companies, the source said.
The LDP and its ruling coalition partner Komeito will launch full-fledged talks on Tuesday on a tax reform plan for fiscal 2023, and the two parties are expected to adopt a tax reform blueprint around December 15.
The focus of the talks is how to fund the envisaged increase in defence expenditures, with some having floated the idea of hiking the corporate tax.
The government is considering raising the defence outlays – which totalled about 5.4 trillion yen (US$40.2 billion) in the initial fiscal 2022 state budget – in stages from fiscal 2023 before reaching the 2 per cent target in fiscal 2027.
The drafting of the defence budget for fiscal 2023, which starts in April, culminates after the Kishida cabinet approves three key documents on Japan’s security policy in mid-December.