Tokyo had originally planned to raise taxes as early as fiscal year 2024. Last week, Koichi Hagiuda, policy chief of the ruling Liberal Democratic Party, urged Prime Minister Fumio Kishida to postpone the tax plan until 2025 and come up with proposals to make better use of other sources of financing, according to the report.
The sources told the news agency that the government will formalize the updated tax plan by including it in a draft economic and fiscal policy to be approved by the cabinet on Friday. Until taxes are raised, nontax revenues will be used to finance the defense budget.
The draft policy is likely to show that the government will not consider additional tax burdens, including by raising the consumption tax, and will deal with the issue "flexibly" while examining various ways to raise the money, the report said.
In late 2022, Kishida announced an increase in government defense spending from 27.5 trillion yen ($213 billion) to 43 trillion yen over the five-year period through fiscal year 2027 to be in line with NATO's standard requirement to spend 2% of GDP on the military. To secure the funds, Tokyo plans to raise corporate, income and tobacco taxes, as well as restructure government spending and collect more revenues.