Photo/Illutration The Ground Self-Defense Forces’ Camp Yonaguni in Okinawa Prefecture (Asahi Shimbun file photo)

In what amounts to an unprecedented step in the postwar era, the government is considering using construction bonds to help fund a massive military buildup that is making Asian neighbors anxious.

Construction bonds are normally used to pay for public works projects, such as roads, that will be used by the public for a prolonged period.

For decades, the government has stood firm in not using them to fund defense expenditures for, among other things, building aircraft and naval vessels that have a relatively short shelf life.

A government panel of experts submitted a report in November that warned against the use of government bonds to pay for defense, harking back to disastrous decisions in World War II when war bonds were issued to fund the ballooning costs of fighting.

Forging ahead with the issuance of construction bonds would mark a major shift in policy by the Kishida administration.

One proposal under consideration is to issue about 1.6 trillion yen ($11.8 billion) in construction bonds for the five years until fiscal 2027, sources said.

The money would be used to build barracks for the Self-Defense Forces as well as warehouses on SDF bases. The funds could also be used for the construction of ports in the Nansei chain of islands extending out from southern Kyushu that would be a focal point of a military flare-up over Taiwan, the sources added.

A key concern is that once construction bonds have been used, it could open the floodgates for more to be issued if even greater defense expenditures are called for in the future.

The government says an additional 17 trillion yen will be needed to finance the new five-year defense spending plan.

Aside from construction bonds and tax increases, government officials are considering three other revenue sources to pay for the increase.

They expect 4.6 trillion yen to come from a new fund to strengthen defense capabilities that will include non-tax revenues, money that went unspent by independent administrative agencies and gains from the sale of government assets. The other revenue sources are 3.5 trillion yen from unspent funds in other areas and 3 trillion yen from spending reforms.

High-ranking officials of the ruling Liberal Democratic Party’s Research Commission on the Tax System agreed Dec. 14  that the 1 trillion yen needed in fiscal 2027 would be paid for through increases in corporate, cigarette and personal income taxes, although no specific amounts were decided.

(Ryuhei Tsutsui contributed to this article.)

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