Japan’s spending on defense should be increased from the about ¥5.4 trillion this fiscal year to the mid ¥6 trillion range for next fiscal year, LDP Secretary General Toshimitsu Motegi said in Tokyo during a recent symposium.
“If government does not present a clear direction and continues being an extension of the past, Japan cannot deal with the drastically changing security environment,” the Liberal Democratic Party bigwig said, arguing that it is important to hold discussions on building up the necessary budget.
Motegi expressed the views during the symposium organized by the Yomiuri International Economic Society and The Yomiuri Shimbun on Monday.
The aim, Motegi said, is to drastically strengthen Japan’s defense capabilities within five years, with the North Atlantic Treaty Organization’s guideline for its members (Japan is not a member) of spending at least 2% of gross domestic product on defense in mind.
Japan’s defense spending this fiscal year amounts to 0.96% of GDP. According to the Defense Ministry, if the budget for the Japan Coast Guard and other spending is factored in the same manner as NATO’s budget allocation standards, Japan’s defense spending in fiscal 2021 was about ¥6.9 trillion, or 1.24% of GDP.
“The difference from NATO standards should be taken into consideration,” Motegi said.
The administration of Prime Minister Fumio Kishida, who is also the LDP president, has set a policy of spending ¥400 billion over three years on human resources development and support for reemployment, among other purposes.
“Frankly speaking, it is small,” Motegi said, adding that it is necessary to increase the spending to around ¥1 trillion over five years.
As for the supply of semiconductors and other important items, Motegi said there is a need in terms of economic security to share roles with countries with the same sense of values to manufacture such products.
Issues over securing funds
Motegi was speaking against a background of increasing concerns over defense and how to pay for it.
LDP members have begun to discuss how to secure financial resources for an increase in defense spending in a full-fledged manner for the year-end, when three defense-related documents are expected to be reviewed and the budget proposals for the next fiscal year will be compiled.
While there is deeply rooted support for the issuance of government bonds, others are calling for the government to place priority on social security costs, which amount to the largest expenditure.
Kishida has clearly expressed his aim to “substantially” increase the nation’s defense spending from the next fiscal year at the earliest.
The government plans to review the National Security Strategy, the National Defense Program Guidelines and the Medium Term Defense Program at the end of the year and intends to decide to what extent the defense spending should be increased for the five years through fiscal 2027.
The LDP manifesto for the recent House of Councillors election set a target of 2% of GDP for the defense budget. The focus now is on how to secure the additional financial resources in the several trillions of yen to achieve the mark.
Within the party, members mainly from conservative segments insist on the issuance of government bonds to cover all the additional amount. Late former Prime Minister Shinzo Abe, who was a key figure among the party’s conservatives, had argued, “Defense spending is a budget to pass the nation on to the next generation, so it’s fine to have it covered by government bonds.”
LDP members close to Abe on the issue are highly dissatisfied with the current debate on funding. A mid-ranking party member said, “It is putting the cart before the horse that defense spending to respond to the harsh security environment has been hampered by the debate on how to secure financial resources.”
On the other hand, there are party members who oppose the issuance of government bonds as that would result in passing the burden along to future generations.
“If defense spending needs to be increased to that much, the discussion of whether to lower the standards of social security benefits would be inevitable,” said the chairperson of the LDP’s Research Commission on the Tax System Yoichi Miyazawa, who is close to Kishida, on a BS TV Tokyo program on Sunday.
Miyazawa’s comment implied that rather than relying on the issuance of large amounts of government bonds, the government should attach importance to fiscal discipline and decide on priorities. Costs for social security, such as medical services and pensions, are expected to increase as well.
“Government bonds are no more than debts and the burden to repay will remain on the part of future generations,” said Natsuo Yamaguchi, leader of the LDP’s coalition partner Komeito. “It’s not good to be overly reliant on them.”
If government bonds are not used to cover spending and social security costs are not reduced, a tax increase could be an option. After the 2011 Great East Japan Earthquake, income and corporate taxes were temporarily increased to fund reconstruction. A senior Finance Ministry official said that the government should use this case as a reference for the debate on defense spending, too.
The LDP plans to start discussions on budget compilation for next fiscal year as early as this week. Kishida intends to decide his stance on the issue after discussions within the LDP and the ruling coalition.