Japan govt panel recommends broad tax burden for defence budget hike

A Japanese panel of experts advising Prime Minister Fumio Kishida on Tuesday recommended broad tax measures to pay for a defence spending hike and cautioned against raising debt that could expose the nation to international market changes. The recommendations come as Kishida's administration mulls how to pay for a pledge to "substantially" increase defence spending to counter what Tokyo sees as a growing security threat posed by neighbouring China.

A Japanese panel of experts advising Prime Minister Fumio Kishida on Tuesday recommended broad tax measures to pay for a defence spending hike and cautioned against raising debt that could expose the nation to international market changes.

The recommendations come as Kishida's administration mulls how to pay for a pledge to "substantially" increase defence spending to counter what Tokyo sees as a growing security threat posed by neighbouring China. "Recognising that the entire nation must cooperate in this, it is necessary to win public understanding with a range of tax measures that spread the burden," the panel's report said. The group, which pointed to the financial market worry that sparked a fall in the British pound to fall, also urged the government to rein in other government spending to ensure the stability of public finances.

Choosing tax increase to pay for Japan's biggest military build up since World War Two means Kishida may have to decide whether to ask businesses to pay more corporate tax rates or seek a bigger contribution from individuals through higher income taxes or other means. Kishida, who will announce a revised national security strategy and midterm defence build up plan by the end of the year, said the Liberal Democratic Party would discuss the group's recommendations. The ruling group has already said it wants to double military spending to around 2% of gross domestic product over the next five years.

It wants the extra money to help pay for new munitions, including longer-range missiles capable of striking targets over 1,000 kilometres from Japan's islands that could deter Chinese forces from attacking Japan or neighbouring Taiwan, and that could also be used to hit missile sites to thwart any North Korean attack. The expert panel led by former Vice Minister for Foreign Affairs Kenichiro Sasae agreed that Japan needed to reinforce its Self Defense Forces to deter China.

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