Japan appears US$44b short as it seeks to bolster defence

JAPAN needs to find another six trillion yen (S$59.1 billion) to fund a promised expansion in defence spending over the five years starting in April, according to documents seen by Bloomberg.

Prime Minister Fumio Kishida has pledged 43 trillion yen in defence outlays over the period to fiscal 2027, seeking to bolster Japan’s capabilities amid growing threats from North Korea, China and Russia. That is an unprecedented hike compared with an initial plan for 25.9 trillion yen in military spending. 

About 11.1 trillion yen of the extra requirements will come from non-tax revenues. This includes the government’s foreign exchange funds account and its share in a large commercial building in central Tokyo, as well as spending cuts and surpluses. That leaves a shortfall of about six trillion yen, the documents showed.  

Kishida said during the weekend that he would not rely on bond issuance to cover defence costs in the longer term, but would increase taxes in stages starting in fiscal 2024. He has faced opposition from two cabinet members, who have urged caution about raising taxes as the government pushes for wage rises and a virtuous economic cycle. 

The government is also considering bond issuance to cover part of the increase in outlays, national broadcaster TBS reported earlier. BLOOMBERG