On December 5, reports indicated that Japan’s ruling Liberal Democratic Party (LDP) is considering an income tax increase for defense spending, which had been delayed among other tax increase for strengthening defensive strength, and is now planning to implement it starting in January 2027.
This marks the first time the income tax increase for defense purposes has been specifically scheduled. It is believed that the government needs stable financial resources to accelerate its goal of increasing defense spending to 2% of GDP by 2027, bringing forward the target from 2025.
The ruling coalition, including the Japan Innovation Party, which has opposed the defense tax increase, is expected to continue discussions within the ruling parties.
According to the Mainichi Shimbun, a proposal is being discussed to create a special defense income tax that would add additional 1% to the current tax rate, while lowering the current 2.1% of the “special reconstruction income tax” that has been imposed for recovery from the Great East Japan Earthquake to 1%.
In 2022, former Prime Minister Fumio Kishida included in the “National Security Strategy,” a cornerstone of Japan’s security policy, the goal to increase defense spending to 2% of GDP by 2027.
To secure the financial resources for the defense spending, the government had planned to gradually raise income taxes, corporate taxes, and tobacco taxes starting in 2024. However, the government had repeatedly delayed the implementation due to public opposition.
