Finance Minister Shunichi Suzuki said on Friday that TOKYO Japan must stick to its goal of a primary budget surplus by the year 2025, even as a planned increase in defence spending raises the spectre of worsening already dire public finances.
It's true, that's a lot of money that Suzuki said, referring to a plan for 43 trillion yen $315.46 billion in defence spending over the next five years.
Suzuki said when asked about how defence spending may affect Japan's fiscal target, we need to stick to the goal of achieving a primary budget surplus by fiscal 2025.
Japan wants to achieve a primary budget surplus, excluding new bond sales and debt servicing costs, by the end of the 2025 fiscal year, in March 2026.
Fiscal discipline must be maintained, he added.
Prime Minster Fumio Kishida told the coalition tax chiefs to come up with a plan to increase taxes to fund defence spending by the end of the year.
Kishida's government is considering raising taxes in stages after fiscal 2023 and towards 2027 to help fund a plan to secure funding for the planned 43 trillion yen in defence spending for the five-year, mid-term defence plan.
After fiscal 2027, the government will need to earmark additional spending worth 4 trillion yen a year, of which some 1 trillion yen would be paid by tax increases.
Suzuki said that it is important to get consent from the public as we are going to ask them to shoulder the burden.
He brushed aside the possibility of issuing additional debt.
He said it's hard to consider debt issuance as stable sources of funding that strengthened defence capabilities over time.
Instead, the government would focus on reforming spending and tapping unused budget and non-tax revenue, and putting them together in a pool of funds to strengthen defence.
Kishida plans to reduce defence spending to an amount equivalent of 2 per cent of gross domestic product over the next five years, from 1 per cent now.