TOKYO (Reuters) – Japan has not ruled out raising income taxes on businesses and households to fund a planned increase to its defense budget in the next fiscal year, the head of the ruling Liberal Party’s tax policy committee said on Monday.
But Yuichi Miyazawa told reporters he did not have any specific items in mind for raising taxes.
Japan’s Defense Ministry has requested a 3.6% increase in spending to 5.6 trillion yen ($37.98 billion) for the next fiscal year starting in April, as Prime Minister Fumio Kishida’s government seeks to build military capabilities.
This is equivalent to about 1% of Japan’s GDP of 544 trillion yen. Japan’s public debt burden is the heaviest in the industrialized world at more than twice the size of its GDP.
Kishida’s Liberal Democratic Party has pledged to double defense spending to 2% of GDP over five years, raising it by about 5 trillion yen.
Miyazawa ruled out an increase in sales tax – the equivalent of value-added tax in other developed countries – to fund the increase in defense spending, saying the tax is meant to fund social insurance expenditures.
Makoto Nishida, Miyazawa’s counterpart to the LDP’s junior partner Komeito, also suggested the possibility of raising taxes, rather than issuing debt, to fund defense strengthening in an interview with Reuters in late September.