Ryosuke Hanada, a Sydney-based security analyst, said the best and only option for securing Japan’s long-term defence budget is to revitalise its defence industry and levy taxes on its profits. The sale of Patriot missiles to the US is “a good starting point”, said Hanada, who is a doctoral student in the department of security studies and criminology at Macquarie University.
“In the short and medium term, the government has to raise both corporate and individual taxes as well as cut expenditure for social welfare, which [constitutes] 33.6 per cent [of overall spending] in financial year 2024,” Hanada said. “This requires the determination to make controversial political decisions.”
But the revised arms-transfer policy guidelines were still “restrictive” given the objections from some factions in Japan’s parliament, he added.
Komeito, the junior coalition partner of the ruling Liberal Democratic Party, has been hesitant to support the easing of restrictions on Japan’s defence exports, concerned that such sales could exacerbate armed conflicts worldwide and run counter to the country’s post-war pacifist constitution.
In a further sign of the significant shift in its defence policy, Japan recently signed a pact to jointly develop with Britain and Italy a next-generation fighter jet, its first major tie-up that did not involve the US since World War II.
Despite the lack of political consensus within the ruling party over the tax increases, Hanada said there are still other ways that Tokyo could fund the enlarged defence budget, such as through financial surpluses, non-tax revenue and expenditure reforms.
For instance, 1 trillion yen (US$6.9 billion) could be covered by the 2022 surplus from the Foreign Exchange Fund Special Account – used by Japan for interventions in foreign exchange markets – Hanada said, citing a recent finance ministry announcement.