The Takaichi government and ruling parties are intensifying discussions on how much to spend on defense and how to pay for larger budgets.
Defense promises to be a significant piece of the government’s spending program, making it difficult to assess the overall size of the budget and bond issuance until the government and ruling parties reach a consensus.
The government will aim for more defense spending but is unlikely to include a 3.5% of GDP target, opting instead for creative accounting to swell the headline figure and potentially embracing a corporate tax hike to fund the increase at least partially, though this faces opposition from the business community.
