Off The Wire
UPDATE 2-Japan's ruling party says it won't rule out any options for funding defence boost
(Adds estimate of amount of extra funding that tax hikes are
expected to cover in paragraph 8)
By Tetsushi Kajimoto and Takaya Yamaguchi
TOKYO, Dec 7 (Reuters) - Japan's government will not
rule out any measures to fund increases in defence spending, the
ruling Liberal Democratic Party's policy chief Koichi Hagiuda
said on Wednesday, when asked about possible additional debt
issuance.
Hagiuda however told reporters after a meeting with his
coalition partner Yosuke Takagi of the Komeito party that the
government would not raise taxes in the next fiscal year when
the five-year defence spending plan kicks off.
"We are not considering funding all the spending with tax
hikes," Hagiuda said. "We must curb spending (in other areas)
and make every effort. If that's not enough, we must consider
tax (hikes)."
Hagiuda added that the ruling coalition and government
officials will meet on Thursday to further discuss details. A
final decision will be made by year-end on the source of the
funding, including any tax hike plans.
Prime Minister Fumio Kishida has announced plans to lift
defence spending to an amount equivalent to 2% of gross domestic
product within five years, from 1% now.
The boost in defence spending stems from an increasingly
assertive China and unpredictable North Korea in addition to
growing geopolitical risks due to the Ukraine crisis and the
tension in the Taiwan Strait.
Kishida ordered the government on Monday to earmark around
43 trillion yen ($313.69 billion) for the upcoming five-year
mid-term defence buildup plan, compared with the current
five-year plan worth 27.5 trillion yen.
The ruling parties are assuming around 1 trillion yen of the
defence spending rise will be paid for through tax hikes by
fiscal 2027, Kyodo news agency cited an anonymous source as
saying.
Any big spending plan in Japan stokes worry about worsening
one of the industrial world's worst debt burdens, which amounts
to twice the size of the country's annual economic output.
In securing financing, Japan will consider steps such as
cuts in already existing spending plans, non-tax revenue such as
surplus money from the foreign reserves special account, money
left over from COVID-19 funds, or more debt issuance, government
sources have said.
(Reporting by Tetsushi Kajimoto and Takaya Yamaguchi;
Additional reporting by Daniel Leussink; Editing by Toby Chopra
and Raju Gopalakrishnan)
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