Japan had a record tax revenue of 71.14 trillion yen ($491 billion) for fiscal 2022 through March, along with a bigger-than-estimated surplus, part of which will be used to cover a substantial boost to defense spending in the coming years, according to government data released on Monday.
Japan's economic recovery from the COVID-19 pandemic and rising prices for everyday goods raised consumption tax revenues, while robust earnings, due in part to a weaker yen that benefited exporters, led to higher corporate tax payments.
It is the first time that Japan's tax revenue has topped the 70 trillion yen mark. The tax income grew 6.1 percent from fiscal 2021 and set a record for a third straight year.
For fiscal 2022, the surplus came to 2.63 trillion yen, well above the annual average of some 1.4 trillion yen seen over the past decade, according to an estimate by the Finance Ministry.
Roughly half of the surplus, or about 1.3 trillion yen, will be reserved for financing a combined 43 trillion yen increase in defense spending over the five years through fiscal 2027.
That surplus amount is roughly double the size estimated by the government every year, or 700 billion yen, potentially raising calls from lawmakers to put off tax hikes to secure the necessary funding for defense.
Prime Minister Fumio Kishida has unveiled plans to bolster Japan's defenses to better cope with threats from its neighbors such as China and North Korea.
With state debt already twice the size of the economy, the government plans to prioritize spending reform and use surplus money before hiking income, tobacco and corporate taxes.
The exact timing of the tax increases has yet to be determined at a time when speculation is swirling that Kishida will dissolve the House of Representatives later this year.
Facing calls from the ruling Liberal Democratic Party to defer tax hikes, the government said in its recent policy blueprint that it will decide on the timing flexibly with an eye on "fiscal 2025 or later," pushed back from the earlier planned "fiscal 2024 or later."
For the year that ended on March 31, about a third of the tax revenue, or 23.08 trillion yen, came from consumption tax and 14.94 trillion yen from corporate tax, the ministry said.
