Japan may once again delay a decision on raising taxes to fund increased defense spending, according to a senior official from the ruling coalition, sparking further uncertainty about how Tokyo plans to finance its ambitious military expansion. Mitsunari Okamoto, the policy chief of Komeito, the coalition partner of the Liberal Democratic Party (LDP), told Bloomberg, “It would be ideal to reach a decision this year, but even if that doesn’t happen, it won’t halt our efforts to enhance defense spending and capabilities.”

As part of a five-year defense plan launched in 2022 and estimated to cost ¥43 trillion ($280 billion), the government has proposed increasing personal income, corporate, and tobacco taxes to meet these expenses. The initiative aims to raise defense spending to 2% of GDP, doubling its previous share of just over 1%.

However, the timing of the tax hikes has remained unclear, with the government postponing a decision each year. This issue has gained urgency, especially as former U.S. President Donald Trump, known for pressuring allies to take on greater defense costs, could return to office. Prime Minister Shigeru Ishiba has expressed his intention to finalize a tax plan by the year’s end, ahead of fiscal adjustments in April. But this effort is complicated by the ruling coalition’s recent loss of its parliamentary majority.

In October, the Defense Ministry submitted a record budget request of ¥8.5 trillion for the next fiscal year, a 10.5% increase from the current year. The request includes funding for advanced initiatives such as a satellite system for improved missile detection. While Komeito, traditionally cautious about defense expenditures due to its ties to a lay Buddhist organization, has softened its stance amid growing regional tensions, public resistance to tax hikes remains strong despite general support for bolstering military capabilities.

Heightened concerns about China’s military expansion, North Korea’s advancing missile programs, and Russia’s invasion of Ukraine have shifted public sentiment toward favoring stronger defense measures. Additionally, U.S. calls for allied nations to reduce reliance on American military support have influenced Japan’s evolving perspective on national security.

Okamoto suggested that alternative funding sources could be explored if tax increases are deferred again. “Even without a tax hike, the government will allocate necessary reserves for defense spending,” he stated, emphasizing that the overall framework to enhance defense capabilities remains intact.

The coalition’s ability to implement tax increases has been further complicated by its need for support from at least one opposition party to pass legislation. Efforts to secure backing from the Democratic Party for the People have faced resistance, as its leader opposes tax increases to finance defense spending.

Okamoto also reflected on his past interactions with Trump while working for Goldman Sachs, noting the former president’s emphasis on personal relationships. He expressed optimism that Ishiba’s direct communication style could help foster a positive relationship with Trump, similar to the rapport former Prime Minister Shinzo Abe developed during Trump’s first term. 

"Trump is likely the U.S. president who values personal relationships the most," Okamoto remarked. "When Ishiba negotiates with him, I hope the prime minister can confidently assure him, ‘Leave Japan to me; I’ll handle it.’”

Paraphrasing text from "Bloomberg" all rights reserved by the original author.