Japan Approves Tax Hikes For Defense Spending, But Defers Implementation

Japan’s Prime Minister Fumio Kishida attends a press conference in Tokyo on Dec. 16, 2022. David Mareuil/POOL/AFP via Getty Images

Japan’s ruling bloc agreed on Friday to increase taxes to fund a substantial increase in the country’s defense spending but stopped short of deciding when the measure would go into effect.

Prime Minister Fumio Kishida has planned to increase defense spending to 43 trillion yen ($315 billion), or 2 percent of gross domestic product, over the next five years to bolster Japan’s defense capabilities.

To achieve this, the ruling bloc proposed imposing a corporate tax surcharge of 4 percent to 4.5 percent, with exemptions for small and medium-sized firms earning less than 24 million yen ($175,811) per year.

“Less than 6 percent of all corporations will be subject to this measure,” Kishida told a press conference, according to his office.

The tobacco tax would be raised to 3 yen ($0.02) per cigarette. The ruling bloc also seeks to add a 1 percent surtax to the income tax and cut the existing 2.1 percent disaster reconstruction income tax by 1 percent, Kishida said.

The tax hikes are expected to generate around 1.1 trillion yen ($8 billion) annually, but the ruling bloc has not yet determined when to implement them. Some lawmakers had opposed raising corporate taxes as it could hinder wage increases deemed necessary to cope with inflation.

“These measures will not be implemented from next year. Based on the current economic situation, it will be implemented step by step over several years,” Kishida added.

Yoichi Miyazawa, chief of the ruling party’s tax panel, said the tax hikes will be implemented “at an appropriate time” in the fiscal year 2024 or later.

Counterattack Capability

Japan’s government also approved three key defense documents, including the National Security Strategy, which stipulates that Japan’s armed forces should possess counterattack capability to deter enemy attacks.

The move is widely seen as a departure from Japan’s post-war constitution, which renounces war or the use of force in settling international disputes. Kishida said that Japan must keep up with missile technology amid “a severe security environment.”

He said that Japan would uphold its post-war peace-loving stance and maintain its exclusively defense-oriented policy, which states that defensive force could only be used in the event of an attack.

“We have written in detail the counterattack capabilities that we have decided to possess, including their definition and the circumstances under which they can be used, in the National Security Strategy,” Kishida told reporters.

The 5th and 8th Air Wing of Japan Air Self-Defense Force's F-15 and F-2 fighters hold a joint military drill with U.S. Marine Aircraft Group 12's F-35B fighters off Japan's southernmost main island of Kyushu in this handout picture released Oct. 4, 2022. Joint Staff Office of the Defense Ministry of Japan/Reuters

The alliance with the United States will remain the cornerstone of Japan’s security strategy, he added. Japan has ramped up its joint exercises with the United States and other regional allies in recent months amid North Korea’s escalating missile launches and China’s increased military assertiveness.

Kyodo News reported that Japan referred to China as a “threat to residents of the region” in its strategy document following the Chinese regime’s military drills near Taiwan in August, which resulted in five ballistic missiles landing in Japan’s exclusive economic zone.

The Chinese Communist Party (CCP) denounced Japan’s national security strategy and urged Japan to “act upon the political consensus that the two countries are cooperative partners and do not pose a threat to each other.”

“Hyping up the ‘China threat’ to find an excuse for its military build-up is doomed to fail,” Chinese Foreign Ministry spokesman Wang Wenbin told reporters on Friday.

Japan reported earlier this month that its military detected an increase in joint patrols by Chinese and Russian warplanes around its territory.

Japan’s Defense Ministry claimed that two Chinese H-6 bombers and two Russian Tu-95 bombers were spotted flying together to the East China Sea from the Sea of Japan on Nov. 30, prompting its military to scramble fighter jets in response.

The ministry stated that the four aircraft didn’t enter Japan’s airspace, but they posed a military threat. Russian Tu-95 bombers are capable of carrying cruise missiles, although it’s unclear whether they were armed during the mission.