Japan Doubles Defense Spending, Considers Tax Hike on Wealthy with Annual Income Over 1 Billion Won

Tax Burden Rate Increases from Annual Income of 100 Million Yen
High Tax Rate Considered Only on Stock Sale Amounts
Discussion Possible Linked to Defense Budget Resources

On the 26th, amid trade tensions between the United States and China, the Japanese yen's value rose intraday to 104 yen, its highest level since 2016. At the KEB Hana Bank Counterfeit Response Center in Euljiro, Seoul, an employee is organizing yen currency. Photo by Moon Honam munonam@

[Asia Economy Reporter Lee Ji-eun] The Japanese government is reportedly considering raising taxes on high-income earners with annual incomes exceeding 100 million yen (approximately 940 million KRW) to fund defense expenses, according to the Nihon Keizai Shimbun on the 8th. The Japanese government is pushing to nearly double defense spending within five years.

According to the report, the Japanese Ministry of Finance is discussing plans to increase taxes on the wealthy, whose annual incomes reach several hundred million yen. This is because they have identified a problem in the current system where high-income earners pay less tax than low-income earners.

Data released by the Ministry of Finance last month showed that for the income bracket of 50 million to 100 million yen annually, the combined burden of income tax and social insurance premiums reaches 28.7%, the highest among all brackets. In contrast, the 500 million to 1 billion yen bracket has a burden rate of 21.5%, and the 5 billion to 10 billion yen bracket is at 17.2%, showing a trend where the tax burden rate decreases as income increases.

This phenomenon, where the tax burden rate decreases once annual income exceeds 100 million yen, is referred to in Japan as the "100 million yen wall." Nihon Keizai explained that unlike salaries, where taxes vary with income, a flat 15% tax rate is applied to gains from stocks, land, and building sales, causing this effect. To address the "100 million yen wall" issue, the Ministry of Finance is considering measures such as increasing taxes only when stock sale amounts exceed 500 million yen, excluding gains from land and building sales.

The Japanese government's move to reform the tax system is largely analyzed as an effort to secure funding for defense expenses. Japan plans to raise defense spending, currently at about 1% of its Gross Domestic Product (GDP), to the NATO level of 2% within five years. Japan's defense budget this year is 5.4 trillion yen, and increasing it to 2% would require more than 5 trillion yen annually.

Nihon Keizai stated, "The Japanese government is considering broad measures to secure tax revenue to cover defense costs," and added, "Discussions on taxing high-income earners may be linked to the issue of securing defense funding."

Within Japan, alongside taxing high-income earners, options such as issuing deficit bonds or raising corporate taxes to fund defense spending are also emerging. The Asahi Shimbun reported, "Recently, the government lowered corporate tax rates to encourage wage increases in companies, but results have been insufficient," and noted, "Corporate tax hikes are being seriously discussed as a means of securing funds."

On the other hand, regarding the issuance of deficit bonds, there is significant opposition even within political circles. The Mainichi Shimbun reported, "Given the nature of defense spending requiring permanent funding, there is strong negative sentiment toward issuing all funds through government bonds."

This content was produced with the assistance of AI translation services.