Will Japan raise corporate taxes on AI and semiconductor companies to boost defense spending?

[Financial News] The Japanese government, which plans to sharply increase defense spending, is considering raising corporate taxes to fund it. Japan plans to revise its three key national security documents by the end of the year and determine the scale of defense spending for the five years beginning in 2027 through its Defense Buildup Program.
According to Japan’s Sankei Shimbun on the 18th, the Defense Buildup Program established in 2022 set total defense spending at 43 trillion yen (about 363 trillion won) over five years. The next plan could increase that figure to as much as 80 trillion yen (about 675 trillion won). This is because the Japanese government plans to procure drones in large numbers and expand its stockpiles of ammunition and missiles in preparation for the possibility of a protracted war.
Meanwhile, Japanese government and ruling party officials believe that major AI and semiconductor companies have built up retained earnings on the back of recent strong results, and are optimistic that corporate tax increases can be implemented without difficulty. When it drew up the three key national security documents in 2022, the Japanese government also raised corporate, income and tobacco taxes, securing more than 1 trillion yen (about 8.4 trillion won) in additional revenue.
However, business circles have pointed to the possibility of a backlash, arguing that tax increases would lead to a decline in international competitiveness and higher wages. On the 13th, Japanese Prime Minister Sanae Takaichi said only at the Budget Committee of the House of Representatives of Japan, “I will present the specifics clearly in the upcoming budget formulation process.”
[email protected] Hong Chae-wan Reporter