THE ASAHI SHIMBUN
April 7, 2023 at 18:58 JST
Maritime Self-Defense Force ships take part in a training exercise. (Asahi Shimbun file photo)
Deliberations began in the Diet on April 6 on legislation to establish a new fund that would help pay for a massive defense buildup over the next five years.
From the current fiscal year, the Kishida administration is seeking about 43 trillion yen ($326 billion) for defense spending. That means new revenue sources must be found to cover about 14.6 trillion yen of that amount.
The bill would set up a new fund to strengthen defense capabilities that will include non-tax revenues, surpluses that went unspent by independent administrative agencies and gains from the sale of government assets.
Between 4.6 trillion yen and 5 trillion yen will be needed over the five-year period from that fund. But due to doubts about whether such amounts can be raised, opposition lawmakers are already linking the new fund with a government plan to raise taxes.
Tax increases are the fourth option for paying for the defense buildup but because of the unpopularity of any tax hike, the government in December only said such tax increases would take effect from after fiscal 2024, with specifics such as how much would be covered by income and corporate taxes left for future discussions.
The defense fund bill would set up a new revenue source from fiscal 2024 that would allow for budget surpluses to be transferred to the fund. For example, organizations that operate public hospitals have accumulated a surplus of 74.6 billion yen while the special account that is used for foreign exchange intervention moves has a 1.2 trillion yen surplus.
But much of those surpluses was produced through deficit bonds and the money was initially intended to reduce bond issuances in the future.
Other non-tax revenues envisioned are from the sale of state-owned assets. But such assets are only one-time revenue sources once they are sold.
On top of the huge amounts the fund would have to cover in the five-year period until fiscal 2027, government officials also want the fund to contribute about 900 billion yen annually from fiscal 2028 and beyond.
But no decisions have been made about where the money will come from to allocate to that fund.
That lack of certainty is leading the opposition to cooperate against the defense fund bill because there is a consensus disapproval for any possible tax increase.
The opposition is already using an anti-tax hike slogan in campaigning for the Oita Upper House by-election that officially began on April 6.
(This article was written by Kuniaki Nishio and Ryuhei Tsutsui.)
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