Making defence spending sustainable for Japan

Author: Yuki Tatsumi, Stimson Center

One of the key highlights of Japan’s three national security documents released on 16 December 2022 — the National Security Strategy, the National Defense Strategy and the Defense Build-up Plan (DBP) — is the commitment to increase defence spending.

The 2022 DBP revealed that the Japanese government will spend approximately 43 trillion yen (US$310 billion) from 2023–27 to fund the defence capability build-up. Japan’s Ministry of Defence (JMOD) budget will increase annually to reach 8.9 trillion yen (US$64.1 billion) in 2027. The 2023 defence budget demonstrates Tokyo’s determination to follow through on its five-year spending commitments under the DBP. The total budget of over 6.6 trillion yen (US$47.5 billion) is a 27.5 per cent increase from 2022 and the biggest defence budget in Japan’s post-war history.

But the ‘roughly 2 per cent of GDP’ goal that Prime Minister Fumio Kishida discussed in his press conference on 16 December 2022 following the announcement of these three documents is slightly misleading. The two per cent includes not only the JMOD budget but also other national security-related spending such as the Japan Coast Guard budget and national infrastructure investments.

Still, the JMOD’s 2023–27 budget plan is 60 per cent higher than the 2018–22 spending plan. As a country that historically spent roughly 1 per cent of its GDP on defence and resisted calls to spend more, Tokyo’s commitment to such a considerable increase marks a departure from the past.

Highlights from these new documents — such as Japan’s acquisition of counterstrike capabilities and a substantial defence spending increase — continue to grab news headlines. But funding remains a thorny issue. The Liberal Democratic Party (LDP)–Komeito ruling coalition have been working on fiscal measures that will enable Tokyo to follow through on its defence spending commitments.

In December 2022, based on the LDP–Komeito’s approved outline, the Ministry of Finance included ‘tax measures to secure financial resources for strengthening defence capabilities’ in its seven-point 2023 tax reform proposal. These are incremental increases in the corporate, income and tobacco taxes proposed to start after 2024.

The LDP-led ruling coalition introduced the Defence Fiscal Resource Bill to the National Diet in February 2023. The bill provides the fiscal framework through which the Japanese government will fund the defence spending increase — which is essentially a mixed package of the establishment of the Defence Enhancement Fund and the incremental phased increase of corporate, personal income and tobacco taxes. The bill passed the House of Representatives on 23 May 2023, and following the approval by the House of Councillors on 16 June 2023 became a law.

The opposition parties, including the Constitutional Democratic Party, vowed to block the bill. But the large majority that the LDP–Komeito ruling coalition enjoys in both houses of the Diet, with the additional support from the conservative Japan Innovation Party, cleared the way for the passage of the bill.

Even though Kishida won the legislative battle, whether the public will support it remains highly questionable.

In fairness, the majority of the Japanese public supported a defence spending increase. Polls taken by media outlets across the ideological spectrum throughout 2022 consistently show that the public mostly supports a defence spending increase. Three separate media polls taken in April, October and December 2022 show that over half of the respondents supported a defence spending increase. Even a May 2022 poll by the Mainichi Shimbun, known for its criticism of expansive defence policy, shows 76 per cent public support for such an increase.

But the public resisted funding this defence spending increase through higher taxes. Public resistance against tax increases began showing in late 2022. Two polls in November and December 2022 showed that over 60 per cent of the public disapproves of such a tax hike. This public pushback against the defence tax increase continues in 2023. Polls in January and February 2023 showed 71 per cent and 64 per cent of the respondents were against increasing tax to fund defence budget increase.

A 7 May 2023 public opinion poll revealed that nearly 90 per cent of the respondents are concerned about a military crisis in Taiwan and over 60 per cent support Japan acquiring counterstrike capabilities. But 80 per cent are opposed to financing defence spending through tax increases.

Plus, Kishida might have missed the chance to gain public support for the defence tax hike by bringing the case to the public. Two separate polls conducted in January 2023 indicated that 78 per cent and 63 per cent of the respondents thought that Kishida should dissolve the Lower House and call an election before implementing the defence tax hike. But with his approval rating just recovering to 45 per cent following a successful G7 summit in Hiroshima, Kishida decided not to dissolve the Lower House at least in the near future.

The Japanese public seems already to be reacting negatively with Kishida’s choice. The 17–18 June poll conducted by the Kyodo News shows that Kishida’s approval rating has dropped by over 6 points to 40.8 per cent. While the defence-related tax hike was not the only reason for the decline in his approval rating, it indicates that Kishida’s tactics of steamrolling widespread public resistance with the power of majority might work in the short-term, but may undermine the sustainability of Japan’s increased defence spending over time.

Yuki Tatsumi is Senior Fellow, Co-Director of the East Asia Program and Director of the Japan Program at the Stimson Center, Washington, DC.

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