Photo/Illutration The Upper House on June 16 passes into law a bill to secure defense revenues. (Koichi Ueda)

The Upper House passed into law on June 16 a bill to create a defense fund that would cobble together money needed to pay for a massive defense buildup over five years but funding sources remain uncertain. 

The ruling coalition voted in favor of the legislation to come up with some of the funds for the increased defense expenditures totaling 43 trillion yen ($305 billion).

The opposition parties each had their reasons for opposing the bill, but all were in agreement that the measure was vague and many details needed to be worked out.

The possible instability in defense revenues could pose a security risk if other nations began to feel that Japan would be unable to pay for its ambitious plans, said Satoshi Umemura, an Upper House member of opposition Nippon Ishin (Japan Innovation Party).

The main thrust of the law is to establish a new defense fund to pay for part of the approximately 14.6 trillion yen in new revenues that will be needed over five years.

The fund will include non-tax revenues, surpluses that went unspent by independent administrative agencies and gains from the sale of government assets.

But the law has no indication where additional revenue would come from beyond fiscal 2028.

Another defense revenue source is to be unspent budget funds. Government officials have insisted that about 700 billion yen could be found annually, based on the calculation that over the last decade there has been an average of 1.4 trillion yen unspent in the budget.

But opposition party lawmakers pointed out that the calculation was abnormal because the period covered years when massive amounts were set aside to deal with the novel coronavirus pandemic.

While government officials also said 1 trillion yen annually could be scraped  together through spending reforms, they offered little in the way of specific reform measures.

Upper House member Shinichi Shiba of the main opposition Constitutional Democratic Party of Japan said, “We have no idea exactly what kind of measures are to be implemented to secure the needed revenues.”

Tax increases are the fourth option for paying for the defense buildup, but the government has still not decided when personal income, corporate and cigarette taxes would be hiked and by how much.

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