Japan is looking to push back a decision on when to raise taxes to cover a major increase in defense spending in a move that could take on extra weight if the premier calls an early election.
(Bloomberg) — Japan is looking to push back a decision on when to raise taxes to cover a major increase in defense spending in a move that could take on extra weight if the premier calls an early election.
A draft of this year’s fiscal plan handed to a ruling Liberal Democratic Party panel for approval and seen Tuesday by Bloomberg showed that the government is looking to delay the timing of the decision by one year to 2025 or later.
The move to postpone the decision comes amid mounting speculation that Prime Minister Fumio Kishida may call a snap poll as soon as July to solidify his grip on power. The government is expected to tread carefully when it comes to mentioning tax hikes that could turn off voters.
A decision to call an election would depend on many factors, Kishida said Tuesday evening at a press briefing.
“As the end of the current parliamentary session approaches, I expect various developments, and I would like to carefully assess the situation,” Kishida said in comments likely to fuel talk of an election call in the coming days. The current session is scheduled to end on June 21.
Japan has set aside 6.8 trillion yen ($48.8 billion) for defense spending this fiscal year, jumping from last year’s 5.4 trillion yen. The defense costs, which will account for around 6% of total expenditure, have been at the center of debate by the ruling party.
Spooked by Russia’s war on Ukraine, Kishida has pledged to increase defense spending by about 60% over the next five years, saying he may ask the public to bear the burden of up to one trillion yen a year of the increased spending.
The government hinted at the delay earlier Tuesday following a report in local media of a one-year delay.
“We will work closely with the ruling parties to flexibly decide the timing of the tax hikes,” Finance Minister Shunichi Suzuki told reporters.
Suzuki emphasized that even if taxes are raised in the fiscal year 2025, the decision will still take place within the time frame previously set out.
The draft stated that non-tax income and other revenue streams should also be considered when making the decision.
–With assistance from Isabel Reynolds, Yuko Takeo, Yuki Hagiwara and Emi Urabe.
(Adds details of document seen by Bloomberg)
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