Japan is set to earmark ￥40 trillion to ￥43 trillion (US$298.2 billion to US$320.6 billion) for defense spending over five years starting in the next fiscal year, which begins in April, three sources with knowledge of the matter said yesterday.
That would be a jump from the current five-year defense plan for spending of ￥27.5 trillion, stoking worry about worsening one of the industrial world’s worst debt burdens, which amounts to twice the size of Japan’s annual economic output.
The new numbers marked a compromise between the Japanese Ministry of Defense and the Japanese Ministry of Finance, the sources said.
Photo: Bloomberg
Until recently, the defense ministry had sought ￥48 trillion, while the finance ministry had multiple options centering around ￥35 trillion.
Japanese Prime Minister Fumio Kishida told key ministers on Monday to work on a plan to lift defense spending to an amount equivalent to 2 percent of GDP within five years, from 1 percent now, as Tokyo faces an increasingly assertive Beijing.
The key ministers — Japanese Minister of Finance Shunichi Suzuki and Japanese Minister of Defense Yasukazu Hamada — are expected to meet again with Kishida this month to iron out differences over the spending plan.
Photo: AFP
The finance ministry declined to comment.
Defense authorities had informally floated an idea of spending in the upper range of ￥40 trillion over five years, while finance ministry officials had sought spending along the lines of the current five-year plan.
“It won’t be critical to spend some 40 trillion yen. The question is whether the government could secure funding sources and whether we can let the money flow through domestic defense and related industries to back the economy,” Dai-ichi Life Research Institute senior economist Takuya Hoshino said. “If we spend the money to buy weapons and other military goods overseas, that would trigger capital outflows and yen depreciation.”
Reflecting opposition from many lawmakers against tax increases, which could nip the nascent economic recovery in the bud, Japan is expected to delay any such moves for at least a year, experts have said.
That would leave the country with fewer options to secure funding for a boost to military spending.
The three government sources, who declined to be identified because of the sensitivity of the issue, said Japan could focus on measures such as spending cuts, more debt issuance, non-tax revenue such as surplus money from the foreign reserves special account and money left over from funds to help state-related firms cope with COVID-19.
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