New Prime Minister Sanae Takaichi is expected to announce plans to lift defense spending to 2 percent of gross domestic product by the end of March, two years ahead of schedule.

Takaichi will outline her administration’s key initiatives in a policy speech to the Diet, most likely on Oct. 24.

To achieve the defense spending goal within the current fiscal year, the government intends to earmark additional outlays in a supplementary budget, according to a draft of her speech.

The 2-percent target was set by three national security documents formulated at the end of 2022. The initial defense budget for fiscal 2025 stands at 1.8 percent of GDP.

In her speech, Takaichi is also expected to announce plans to revise the three documents by the end of 2026, earlier than planned, for possible further increases in defense spending.

The draft cites “changes in the international situation and the emergence of new forms of warfare” as the rationale for the accelerated revision.

On social security reform, Takaichi is expected to pledge to curb the insurance premium burden on working people.

The draft says the balance between benefits and burdens in the social security system requires “national debate.”

It outlines a plan to establish a “national council” comprising lawmakers from across party lines as well as experts to discuss integrated reform of taxation and social security.

The panel will draw up a refundable tax credit program, which is designed to assist low- and middle-income households with tax relief and cash benefits based on detailed data on citizens’ income and assets that will be collected by the government.

Saying “action cannot wait” for loss-making hospitals and nursing care facilities, the draft includes plans to provide subsidies to improve management and working conditions without waiting for scheduled revisions of medical and long-term care service fees.

On economic matters, Takaichi is set to champion strategic public spending under the rubric of responsible, proactive fiscal policy.

The draft states that the core of her Cabinet’s growth strategy is “crisis management investment,” which will call on both the public and private sectors to invest in economic security, food and energy.

Additionally, an integrated support network covering investment promotion, international expansion, and research and development is being eyed for areas such as artificial intelligence, semiconductors, quantum technology and biotechnology.

Setting the goal of expanding the size of Japan’s economy in the medium to long term, the government plans to establish a growth strategy council to foster economic growth led by AI and other cutting-edge industries.

In her speech, Takaichi is expected to describe China as an “important neighbor” with which Japan needs to build a constructive and stable relationship, while also pointing out that “concerns exist in terms of security and economic security.”

The draft says Japan will promote a “mutually beneficial relationship based on common strategic interests” with China through dialogue between the two countries’ leaders.

On policy regarding foreign nationals, Takaichi is expected to argue that “situations have arisen where people feel anxiety and unfairness in response to illegal acts and deviations from rules by some foreigners.”

The draft says the government will respond firmly” to such behavior “while drawing a clear line against xenophobia” and also strengthen the government’s central coordinating role on this issue. 

The speech will also touch on the “secondary capital” initiative championed by Nippon Ishin (Japan Innovation Party), the new coalition partner of her Liberal Democratic Party.

The draft proposes that the government speed up talks on how some of Tokyo’s responsibilities can be shared with a second capital, a move intended to decentralize capital functions and create multiple economic centers.

To bolster regional development, the draft says the government plans to draw up a “regional future strategy” to attract significant investment by supporting midsize companies, promoting investment opportunities and developing infrastructure.

(This article was written by Taishi Sasayama and Anri Takahashi.)