Japanese Prime Minister Fumio Kishida on Saturday dismissed the idea of issuing government bonds to realize a substantial increase in defense spending in the coming years, adding he will seek public support for his plan to rely instead on tax increases.

The tax hike plan has already met opposition even from Kishida's party lawmakers, although he wants the ruling coalition to work out its details before the end of the year, which coincides with a review of key security and defense documents.

Kishida has set a target of 43 trillion yen ($315 billion) in defense spending over the next five years until fiscal 2027, marking a sharp rise, as policymakers say they need to address increasing security challenges posed by China, North Korea and Russia.

Japanese Prime Minister Fumio Kishida speaks at a press conference at his office on Dec. 10, 2022. (Kyodo)

Despite pushing for what he described as "a major shift" in both security and fiscal policies, Kishida told a press conference to mark the end of a 69-day extraordinary parliamentary session that he does not intend to dissolve the House of Representatives soon for a snap election to seek a fresh mandate.

"We will strengthen our defense over the next five years, and it should be maintained and further strengthened in the years to come after that," Kishida told the press conference.

"To do this, stable funding sources are critical. In this respect, (issuing) government bonds is not an option when we think about our responsibility for the future generations," he added.

For a nation whose outstanding debt is more than twice the size of its economy, the 43 trillion yen target is a drastic increase from the roughly 27.47 trillion yen under the existing plan for the five years from fiscal 2019.

Kishida reiterated that the government will not raise income taxes to finance the planned hike in defense spending, adding that no taxes whatsoever will be increased in the next fiscal year from April.

The government is expected to update its key defense-related documents next week, paving the way for the compilation by year-end of a state budget for fiscal 2023.

"Raising taxes is not our objective. It's bolstering and maintaining the country's defense capabilities," Kishida said.

Kishida has estimated that about a quarter of the future funding needed to boost defense spending will have to be paid by tax increases and the rest by promoting spending reform and using surplus money or other means. Imposing higher corporate taxes is seen as a viable option.

Opposition has grown among members of the ruling Liberal Democratic Party, especially those belonging to the largest intraparty faction previously headed by the late Prime Minister Shinzo Abe. Abe, a conservative lawmaker, had backed the idea of bond issuance to expand the country's defense budget.

Adding to the woes of Kishida, some dissenting voices have also emerged within his own Cabinet. Economic Security Minister Sanae Takaichi became the latest to oppose the premier's tax increase plan, after industry minister Yasutoshi Nishimura struck a cautious note.

"I don't understand the true intension of a prime minister who made remarks that would hurt (corporate) sentiment toward wage hikes at this timing," Takaichi said in her Twitter post. "There is plenty of time to check economic conditions and carefully examine (options)."

Based on its commitment to an exclusively defense-oriented policy, Japan has capped its defense budget at around 1 percent of gross domestic product. It is now seeking to boost the expenditure to 2 percent in fiscal 2027, the final year of the forthcoming defense buildup plan, on par with that of North Atlantic Treaty Organization members.

Kishida is struggling to reverse a downward trend in public support ratings for his Cabinet, caused by suspicion over ties between LDP lawmakers and a controversial religious group, and scandals that have forced some Cabinet members to resign.

Asked about the possibility of reshuffling the Cabinet to make a fresh start, Kishida said, "I'm not thinking about it at all."


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