Japan Mulls Income Tax Hike From 2027 to Help Fund Defense

Japanese Prime Minister Sanae Takaichi’s ruling coalition is discussing raising income taxes from 2027 to help pay for higher defense spending, breaking a three-year stalemate on the issue as mounting geopolitical risks make it more urgent to secure funding sources.

The Liberal Democratic Party is proposing raising the income tax rate by 1 percentage point across all income brackets from January 2027 to help finance defense spending, according to a recent draft of its tax reform plans. The effective income tax rate would remain unchanged for now, as a reconstruction surtax introduced after the 2011 earthquake would be cut by the same amount, the proposal said.