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.