The ruling coalition on Friday approved an annual tax reform proposal for the next fiscal year, which starts in April, including a general plan to raise taxes to fund increased defense spending, raised caps for a tax-free investment program and a plan to impose higher taxes on the superwealthy.

Various reforms were covered in the proposal, but what made headlines leading up to Friday was how to fund the rise in defense spending, which has created a political rift within Prime Minister Fumio Kishida’s Liberal Democratic Party.

Kishida, who wanted to fund the defense boost with tax hikes, clashed with members of his own party and even some of his Cabinet members, who prefer the use of government bonds. In the end, the LDP gave the green light to a basic framework of tax hikes worth about ¥1 trillion, including a corporate tax surcharge of 4.0% to 4.5% to secure about ¥700 billion; a 1% tax surcharge on individuals’ income tax to raise about ¥200 billion; and an increase to the tobacco tax of ¥3 per cigarette for another ¥200 billion.