KYODO NEWS




 

 
The Japanese government on Wednesday proposed a plan to prolong a temporary tax implemented to pay for the 2011 quake and tsunami recovery as it seeks to fund an envisioned increase in defense spending.

The government intends to extend the special tax designed to finance reconstruction for affected areas by 14 years from its expiration in 2037, according to the plan proposed to the Liberal Democratic Party's tax commission.

Senior members of the ruling party's tax panel affirmed at an unofficial meeting that revenues from the special tax for reconstruction as well as corporate and tobacco taxes will be used on defense, LDP lawmakers said.

The move comes as Japan aims to raise its spending on defense to a combined 43 trillion yen ($317 billion) over the next five years through fiscal 2027.

Prime Minister Fumio Kishida has faced backlash over the plan, with his economic security minister raising questions about the timing and business leaders pushing back against tax hikes that would target the corporate sector.

As the tax reform plan for the next fiscal year starting April is mostly decided aside from that for defense, the LDP hopes to settle debate on the topic and finalize the plan on Friday.

So far, sources have said a government plan is to secure 700 to 800 billion yen through higher corporate taxes, around 200 billion yen by hiking the tobacco tax, and another 200 billion yen from the temporary income tax measure adopted in the aftermath of the 2011 major earthquake and tsunami.

Kishida has ruled out issuing new government bonds as a stable funding source, with Japan's fiscal health already in dire straits. He has also said the government will not raise income taxes, given the increased prices already dragging on household budgets.

After the 2011 disasters, Japan imposed a 10 percent corporate tax surcharge. For individuals, the government has imposed a temporary 2.1 percent special reconstruction income tax until 2037 to help rebuild the disaster-hit Tohoku region in the northeast.

The planned increase in annual defense spending is aimed at better coping with the severe security environment amid China's assertiveness, North Korea's missile and nuclear development, and Russia's attack on Ukraine.