Japan is looking to push back its decision on when to raise taxes to cover a major increase in defense spending in a move that could take on extra weight if the premier calls for an early election.
A draft of this year’s fiscal plan handed to a ruling Liberal Democratic Party panel for approval and seen by Bloomberg on Tuesday showed that the government is looking to delay the timing of the decision by one year to an appropriate time in 2025 or later.
Non-tax income and other revenue streams should also be considered when making the decision, the draft indicated.
The government is expected to tread carefully when it comes to mentioning tax hikes that could turn off voters as speculation mounts that Prime Minister Fumio Kishida is looking to call a general election as soon as July to solidify his grip on power.
A decision to call an election would depend on many factors, Kishida said Tuesday evening at a press briefing.
“As the end of the current parliamentary session approaches, I expect various developments, and I would like to carefully assess the situation,” Kishida said.
The current session is scheduled to end on June 21.
Japan has set aside 6.8 trillion yen ($48.8 billion) for defense spending this fiscal year, jumping from last year’s 5.4 trillion yen. The defense costs, which will account for around 6% of total expenditure, have been at the center of debate by the ruling party.
Spooked by Russia’s war on Ukraine, Kishida has pledged to increase defense spending by about 60% over the next five years, saying he may ask the public to bear the burden of up to one trillion yen a year of the increased spending.
The government hinted at the delay earlier Tuesday following a report in local media of a one-year delay.
“We will work closely with the ruling parties to flexibly decide the timing of the tax hikes,” Shunichi Suzuki told reporters.
Suzuki emphasized that even if taxes are raised in the fiscal year 2025, the decision will still take place within the time frame previously set out.
--With assistance from Isabel Reynolds.
(Adds details of document seen by Bloomberg)
