By Makiko Yamazaki
TOKYO (Reuters) -Japan’s new Prime Minister Sanae Takaichi pledged on Friday to accelerate a defence spending target by two years, as her government pursues proactive fiscal expansion on strategic priorities.
In her first policy speech, Takaichi told parliament that Japan aims to reach a defence spending goal of 2% of gross domestic product (GDP) in the current fiscal year through March, ahead of the original target of fiscal 2027.
“Japan must take the initiative in fundamentally strengthening its defense capabilities,” she added.
The defence target underscores Takaichi’s commitment to spending she terms “proactive”, in a bid to stimulate economic growth, based on her argument that a strong economy is a prerequisite for sound fiscal policy.
An advocate of expansionary fiscal and monetary policy, Takaichi also vowed to maintain market confidence and achieve sustainable public finances by reducing government debt as a share of GDP.
Her focus on the debt-to-GDP ratio is a departure from previous governments that proiritised achieving a primary budget surplus, or funding spending without resorting to debt. Some analysts say the shift could slow efforts to restore Japan’s fiscal health.
“The strategic deployment of fiscal measures will raise household income, improve consumer sentiment, boost corporate earnings, and generate higher tax revenues without raising tax rates,” Takaichi said.
Reuters reported that Takaichi is expected to signal Japan’s willingness to accelerate its defence build-up beyond the threshold of 2% during upcoming talks with U.S. President Donald Trump.
However, she is not expected to commit to a new spending target at the meeting, which comes amid Washington’s calls for allies to shoulder more of the regional security burden.
Japan set its defence spending goal of 2% in 2022, pledging to allocate 43 trillion yen ($285.18 billion) over five years, a historic shift from its postwar norm of capping defence outlays at around 1% of GDP.
Defence expenditures in the initial budget for the current fiscal year account for about 1.8% of GDP.
Still, Japan has struggled to secure stable funding sources for the planned 43 trillion yen defence build-up.
Takaichi said the government will partially fund the increase through a supplementary budget, which is being drafted to support an economic stimulus package expected to exceed 13.9 trillion yen.
($1=150.7800 yen)
(Reporting by Makiko Yamazaki; Editing by Clarence Fernandez)
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