Japan Government to Cover Defense Costs by Selling Corporate Shares

Kishida Cabinet Approval Rating Drops
Defense Budget Tax Hike Difficult Immediately
Telecom Company NTT Considers Selling Shares
Holds 34.25% Worth 42.2 Trillion Won
Struggling to Raise Funds Including Corporate Restructuring

The Japanese government plans to consider selling its stake in the telecommunications company NTT, which it owns, to secure funding for defense spending. As the Kishida Cabinet continues to face difficulties in pushing for tax increases due to declining approval ratings, there is speculation that additional stakes in other companies may be sold in the future to cover defense costs.

On the 3rd, Bloomberg reported that Japan's ruling Liberal Democratic Party intends to begin discussions on selling its NTT shares as early as August to raise funds for defense spending.

Currently, the Japanese government holds a 34.25% stake in NTT, worth approximately 4.7 trillion yen (about 42.48 trillion won). NTT was established in 1985 when the former Nippon Telegraph and Telephone Public Corporation was privatized, but under current law, the government is required to hold one-third of the shares. Consequently, there are calls within the government to revise the so-called NTT Act, which mandates a certain level of continuous shareholding.

Bloomberg stated, "If the law requiring shareholding is amended, the Japanese government could raise close to 5 trillion yen through sales," adding, "This money could be used to cover the defense budget."

The Japanese government aims to increase defense spending from the current level of about 1% of GDP to 2% within five years. The budget for the 2023 fiscal year (April 2023 to March 2024) has already allocated 6.8 trillion yen for defense, a 26% increase from the previous year.

Japanese Prime Minister Fumio Kishida. [Photo by Yonhap News]

However, there is no clear plan to cover the rising defense costs. Initially, the Kishida Cabinet considered raising corporate and tobacco taxes to fund the increased defense budget, but public opposition has made it difficult to push through tax hikes. Moreover, the approval rating, which had exceeded 50% immediately after the G7 summit, plummeted to the 30% range due to the Fukushima contaminated water discharge issue, further hindering efforts to advance tax increases.

Bloomberg also predicted that if the NTT Act revision proceeds, the Kishida Cabinet might also pursue selling stakes in other companies it currently holds. As of the end of March last year, the Japanese government held stocks worth 32.8 trillion yen, 90% of which cannot be sold due to laws related to shareholding.

Currently, the Japanese government is reportedly considering selling stakes not only in NTT but also in Tokyo Metro and Shoko Chukin Bank. The government holds a 53.4% stake in Tokyo Metro, valued at 310 billion yen, and a 46.5% stake in Shoko Chukin Bank, valued at 209 billion yen. However, it remains unclear whether the proceeds from selling these stakes will be used for defense spending.

Bloomberg explained, "As Prime Minister Kishida's approval rating has plummeted, the Cabinet appears to be seeking temporary measures to block discussions on tax increases," adding, "Japanese lawmakers are weighing the sale of government stakes in companies to secure funding for defense spending."

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