The defense spending battle lines are forming
Prime Minister Kishida Fumio raised the stakes in the growing debate over Japan’s defense spending when he pledged to President Joe Biden during their summit in Tokyo that the Japanese government would, according to the joint statement, “fundamentally reinforce Japan’s defense capabilities and secure substantial increase of its defense budget needed to effect it.”
In his press conference with Biden following their meeting, Kishida did not elaborate on what he had pledged to the president, whether in terms of a time frame or a share-of-GDP target for defense spending. But the impact of this pledge is still significant. When a Japanese prime minister wants to bind his hands and make it harder to back out of a policy, he makes a very public pledge to a U.S. president or other foreign leaders.
Notwithstanding this pledge, however, the debate over how much Japan’s spending should be raised, how it should be spent, and how it should be paid for is rapidly intensifying.
While his Liberal Democratic Party has made its position clear — increase defense spending to two percent of GDP within five years — Kishida himself has been reluctant to stake out an explicit position. In an interview (jp) with Nikkei before the summit, for example, Kishida was asked about the LDP proposal. The prime minister dodged: “We will discuss what is necessary to protect the lives and livelihoods of the people, not just the budget of the Ministry of Defense.”
But following the summit, other parties have begun staking out their positions. Yamaguchi Natsuo, leader of the LDP’s junior coalition partner Kōmeitō, said (jp) following the summit that “the prime minister’s determination must be taken seriously.” He too endorsed the idea of increasing spending — “politics must respond to the concerns of the people in an increasingly tough security environment” — but said that the question of what size increase is appropriate would be left until after the upper house elections in July. The party will (jp) propose additional defense spending in its proposal for the forthcoming Basic Policies for Economic and Fiscal Management and Reform (aka the “honebuto,” the blueprint for the next year’s budget).
While Kōmeitō has begun staking out a more cooperative stance, the Democratic Party for the People, the DPJ splinter party that has increasingly acted as an outside partner for the ruling coalition, will also endorse a defense spending increase in its HOC campaign manifesto. The center-right opposition party Ishin no kai, which has taken a more adversarial approach to the government as it seeks to become the leading opposition party, will nevertheless also endorse (jp) a defense spending increase in its manifesto, and perhaps even reference a two-percent of GDP target.
The center-left opposition’s stance, however, is still evolving. Izumi Kenta, leader of the Constitutional Democratic Party, also voiced (jp) his support for a defense spending increase. But this position does not mean that there will be no conflict over the defense budget. Izumi also stressed that the opposition would scrutinize the government’s proposals closely, and suggested that the CDP would push back against the LDP’s fixation on a particular share of GDP. And some CDP members are not entirely satisfied with Izumi’s position, especially ahead of an election.
Izumi’s remarks — as well as questions from opposition lawmakers to Kishida in parliamentary debate this week — strongly suggests that the Japanese public’s apparent support for greater defense spending is narrowing the scope for debate on the budget within the Diet. Instead of directly questioning the need for more defense spending, both CDP and JCP upper house lawmakers pressed Kishida on how he would pay for defense spending increases.
Here’s Nikkei’s summary (jp) of comments, including from the CDP’s Haku Shinkun and the JCP’s Tamura Tomoko:
Haku: Without financial backing for increased defense spending, this could put pressure on people's lives and lead to a decline in overall national strength.
Tamura: Will the increased defense spending be financed by a consumption tax hike, cuts in the social security budget, or by issuing government bonds and having the Bank of Japan underwrite them?
Kishida: We will concretely and realistically discuss and compile ideas on what is necessary to defend the lives and livelihoods of the people. We will secure a solid budget to back it. We are also studying how financial resources should be allocated.
With the question of whether to raise spending apparently answered, the question of how to pay for the spending increase is where the friction will be most apparent.
The Ministry of Finance is bracing for the fight. MOF’s Fiscal System Council, which advises the finance minister on budgetary affairs, has submitted its own recommendations for the honebuto, arguing that if the government raises defense spending through temporary measures rather than providing a permanent source of funding, “the result will be to harm our defense capabilities.” The ministry will likely look at how European countries who have embarked on their own buildups have financed those programs.
Abe Shinzō, who in a speech on 23 May called for a FY2023 defense budget between ¥6 and 7 trillion ($47.2-55 billion at current exchange rates), has his own idea for funding Japan’s defense: defense bonds. Just as MOF is able to issue construction bonds as a separate category from deficit bonds, so too should it be able to issue bonds to support investments in national defense, he has argued. As the Mainichi Shimbun explains, this is at odds with a postwar interpretation of the fiscal laws, through which restrictions on the state’s ability to issue debt were viewed as a check on a resurgence of militarism. Whether Abe’s proposal is adopted, he will likely be joined by other conservatives to press for defense bonds that will enable more spending with fewer political restraints.
It is too early to say how this debate will be resolved but its outlines are already clear. Abe and the conservatives will push for deficit spending that raises the ceiling on how much Japan can spend; their opponents in the ruling coalition, the opposition, and MOF will push for more clarity and political control over spending increases, which could ultimately limit their scale and speed. While Kishida may ultimately have to decide how to proceed, it is unlikely to be a top-down decision reflecting his preferences and more the result of what could be heated negotiations within the ruling coalition in the months following the HOC elections.