Japan is considering postponing the beggining of tax hikes to fund a substantial increase in defense spending through fiscal year 2025 or later, instead of the originally planned fiscal year 2024 or later, following a request by the ruling party, sources familiar with the matter said on Monday. The issue.
The Government plans to include this plan in a draft economic and fiscal policy that will be formally approved by the Council of Ministers on Friday. The non-tax revenue will be used to guarantee the necessary financing until taxes are raised according to the new calendar, the sources added.
Prime Minister Fumio Kishida has decided to allocate 43 trillion yen ($309 billion) for defense-related spending over the five years to fiscal 2027.
To achieve this increase, he has presented plans to raise corporate, income and tobacco taxes, in addition to carrying out a spending reform and tapping non-tax revenue.
Shinzo Abe murder hearing suspended due to suspicious object found in court
But the exact timing of the tax hikes has yet to be determined, with the government saying so far only that they will come “at an appropriate time in fiscal year 2024 or later.” In fiscal year 2027, the government aims to raise more than 1 trillion yen from tax increases.
Koichi Hagiuda, policy chief of the ruling Liberal Democratic Party, urged Kishida last week to consider waiting until fiscal year 2025 or later to implement planned tax hikes, while presenting a series of proposals, including them a better use of non-tax revenues.
Prime Minister Fumio Kishida has decided to allocate 43 trillion yen ($309 billion) for defense-related spending over the five years to fiscal 2027.
There has been speculation in the country’s political circles that Kishida will dissolve the powerful House of Representatives to call early elections, as the ordinary session of the Diet is scheduled to end at the end of June. Tax hikes are often unpopular with voters.
The soon-to-be-approved policy bill is expected to say the government will make a “flexible” decision by examining various efforts to secure funding for tax increases in fiscal year 2025 or later, the sources said.
While the country’s fiscal health is the worst among advanced economies, Kishida also plans to increase spending on children’s policy to curb the country’s declining birth rate.
The bill is expected to say that the government “will not consider additional tax burdens, including increased excise tax,” to expand support for childcare, the sources said.
