Japan Mulls Income Tax Hike in 2027 to Cover Defense Spending

Japan's ruling party, led by Prime Minister Sanae Takaichi, is considering raising the country’s income tax in January 2027 to cover part of a substantial increase in defense spending, sources close to the matter said, Kyodo News reported.

Japan had already previously decided to boost defense-related spending to a combined 43 trillion yen ($278 billion) over five years. (Photo: Japan Ministry of Defense/Self-Defense Forces X)

The plan being floated within the Liberal Democratic Party (LDP) would generate revenue for defense-related spending through a special income tax, the sources said.

Before Takaichi became premier in October, Japan had already decided to boost defense-related spending to a combined 43 trillion yen ($278 billion) over five years through March 2028 to cope with growing security threats.

The increase will be partly funded by raising corporate, tobacco, and income taxes, but details have yet to be worked out regarding the timing of the income tax hike amid persistent inflation hurting households.

The plan under discussion within the LDP would raise the income tax to generate upwards of 200 billion yen in revenue, according to the sources.

A special income tax levied to finance rebuilding projects after the 2011 tsunami and nuclear disaster would also be reduced in an apparent effort to soften the blow to taxpayers, Mainichi Japan also reported.