Japan's ruling parties have agreed that taxes should be raised gradually to make up for an expected shortfall in funding to achieve a substantial increase in defense spending to cope with the severe security environment, while dismissing an immediate hike in the next fiscal year.
As part of Prime Minister Fumio Kishida's envisaged five-year plan from fiscal 2023 to boost defense spending to ¥43 trillion ($312 billion), the ruling coalition wants to secure around ¥1 trillion in fiscal 2027, the fifth year, by gradually raising tax rates, sources familiar with the plan said Wednesday.
The Liberal Democratic Party and its junior coalition partner Komeito will hash out details next week on securing the necessary funding, with the country's corporate tax viewed as the most viable target for increase. The ¥1 trillion would be about a quarter of the additional funding needed for the fiscal 2027 defense budget, the sources said.