Disagreements over how to finance increases in defense spending are threatening to split allegiances within the ruling Liberal Democratic Party and erode support for Prime Minister Fumio Kishida, as he remains firmly committed to the plan to cover the additional cost through tax hikes.

On Wednesday, the LDP Tax Commission chair Yoichi Miyazawa accepted Kishida’s plan and they continued their debate on defense spending increases to be covered through three forms of tax: diverting the special income tax levied for reconstruction after the March 2011 earthquake and tsunami; a corporate tax increase; and a cigarette tax. Another meeting is scheduled for Thursday, at which the focus will be on how far the commission can go in formulating a concrete plan for the ruling party's tax reform proposal, which is scheduled to be finalized by the end of the week.

Japan aims to increase its defense spending to a combined ¥43 trillion ($317 billion) over the next five years through fiscal 2027. The focus of discussions now is on how to cover a projected ¥1 trillion shortfall in financial resources, even if spending cuts and other measures are implemented.

Kishida's approach to raise taxes, however, has been met with notable resistance by economic security minister Sanae Takaichi, LDP policy chief Koichi Hagiuda and industry minister Yasutoshi Nishimura, all of whom had close ties to former Prime Minister Shinzo Abe.

Rather than raising taxes, they want the prime minister to consider issuing new government bonds, which have historically been issued for infrastructure projects such as roads, bridges, dams and port facilities rather than for defense. Abe also favored issuing government bonds for defense spending.

Kishida has cited concerns about burdening the next generation with even more debt as his reason for opposing the use of government bonds. The Finance Ministry — which has traditionally had close ties with the 42-member Kishida faction — is also wary of adding more debt, and predicts that by the end of the current fiscal year next March, government debt will top ¥1 quadrillion, or 262.5% of GDP, the highest among the Group of Seven leading industrialized nations.

The prime minister faces growing discontent from within his own party as members worry about the unpopularity of tax increases among individuals and corporations, especially with local elections slated for April. They, too, want Kishida to consider issuing new government bonds.

At a Dec. 9 news briefing, Nishimura urged caution over raising taxes as it could dampen corporate investment and discourage firms from seeking wage increases. However, Nishimura appeared to be more on board with the prime minister’s decision during a news conference on Tuesday.

Haguida has also criticized tax increases as a mistake. At a Sunday gathering in Taiwan to discuss Japan-Taiwan issues, he said that the question of issuing government bonds deserved discussion.

Takaichi created a stir on Twitter on Saturday when she specifically criticized Kishida’s plan to raise corporate taxes, saying she didn’t understand the prime minister’s intent in saying something that would throw cold water on the idea of firms raising wages.

After a meeting on Monday with Kishida, Takaichi remained defiant the following day, telling reporters: “I said nothing wrong, and (if) I’m removed from office, so be it.”

Another resignation, however, could further cripple the unpopular Kishida, who has already been forced to replace three Cabinet ministers over various scandals in recent months.

Information from Kyodo added