Japan won’t rule out corporate, income tax hikes to fund military spending -lawmaker

TOKYO (Reuters) – Japan has not ruled out raising corporate and household income taxes to fund a planned increase to its defence budget in the next fiscal year, the head of the ruling Liberal Democratic Party’s (LDP) tax policy panel said on Monday.

But Yoichi Miyazawa also told reporters he did not have any specific items in mind for the tax hikes.

Japan’s defence ministry has asked for a 3.6% rise in spending to 5.6 trillion yen ($37.98 billion) for the next fiscal year starting in April, as Prime Minister Fumio Kishida’s government seeks to build up military capacity.

That equals about 1% of Japan’s gross domestic product (GDP) of 544 trillion yen. Japan’s public debt burden is the industrial world’s heaviest at more than twice the size of its GDP.

Kishida’s LDP has pledged to double defence spending to 2% of GDP over five years, which would imply raising it by about 5 trillion yen.

Miyazawa ruled out a hike in the sales tax – the equivalent of the value added tax in other advanced nations – to fund the rise in defence spending, saying that tax is aimed at financing social securities outlay.

Makoto Nishida, Miyazawa’s counterpart at LDP’s junior coalition partner Komeito, also flagged the possibility of raising tax, rather than issuing debt, to fund the defence build-up in a Reuters interview in late September.

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