Japan PM Kishida vows to explain planned tax hikes for defense spending growth

Japan's Prime Minister Kishida Fumio has pledged to explain carefully during Diet deliberations his government's plan to raise taxes to cover shortfalls in funds for defense spending.

The government and the two governing parties decided on a plan in December to cover one-quarter of a defense spending increase by hiking the corporate and other taxes. They said the remaining three-quarters will come from fiscal reforms and other methods. The government is seeking to fundamentally reinforce national defense capabilities.

Kishida answered questions from lawmakers at a plenary session of the Upper House on Tuesday.

Hata Jiro, a member of the opposition Constitutional Democratic Party, said the government announced total defense spending without holding debates on it in a way that is transparent to the public.

He said it is deceptive to bankroll the defense outlay growth by repurposing taxes such as the special income tax for the reconstruction of areas affected by the 2011 earthquake and tsunami.

Kishida said the government will do everything it can in terms of administrative and fiscal reforms to finance the defense-spending increase. He said the remaining one-quarter should be shouldered by the public now, rather than passed on to future generations.

Kishida said the government will prepare tax measures to minimize the impact on individuals and businesses.
He said he will continue to provide detailed explanations in Diet deliberations and other occasions to deepen people's understanding of the issue.

Hata added that the prime minister must seek the public's mandate for his decision to make a major shift in the national security policy and to ask people to bear a significant financial burden.

Kishida responded that he will decide appropriately how to seek the public's mandate.

He also addressed an argument that the proposed corporate tax rise to cover defense spending increase would cost companies and run counter to the government's goal of achieving wage hikes by businesses.

He said tax arrangements for small- and mid-sized businesses will be enhanced so that 94 percent of all companies will be excluded from the planned tax hike.

Kishida said he wants to remind people that enhanced defense capabilities will directly support smooth economic activity by securing sea lanes and maintaining supply chains.