Japan PM rules out tax hikes to fund more childcare spending

Prime Minister Fumio Kishida on Monday ruled out raising taxes to fund a planned increase in child care spending to tackle falling birth rates, as government sources said the goal of doubling Japan's child policy budget will likely be set for the early 2030s.

Kishida places priority on boosting child-rearing support, seeing dwindling births as a "national crisis." He has said whether Japan can reverse the downward trend before 2030 will hold the key.

The government would need to secure additional funding of around 5 trillion yen ($36 billion) a year if it doubles the current state budget of around 4.8 trillion yen allocated in fiscal 2023 for a newly launched agency dealing with child and family-related issues.

At issue is how to secure funding sources at a time when Japan's fiscal health is already the worst among developed nations.

"As a general principle, we are not considering asking for more tax burdens, including raising the consumption tax, for the purpose of securing the necessary funding to cope with the declining birth rate issue," Kishida told a government panel meeting as he asked the members to discuss funding options.

The government should first review its spending in other areas and focus on making the economy stronger to have a robust financial base that will enable the funneling of necessary funds to strengthen child-rearing support.

"With a thorough spending review, we will need to reduce the burden effectively borne by ordinary people as much as possible," Kishida added.

Under consideration is to increase social insurance contributions to cover part of an annual spending increase of around 3 trillion yen, the sources said. The government is also weighing the creation of a new special account in the state budget to manage funds specifically for child-related spending.

The time frame for achieving the doubling of the budget is expected to be included in a government strategy in June, the sources added.

While public support for Kishida's Cabinet has been recovering, raising taxes is seen as a sensitive issue that would prompt a public backlash.

Japan is also planning to substantially increase defense spending with a combined 43 trillion yen expected over the next five years.

Kishida has to decide when the government will increase tobacco and other taxes to fund part of the increase.

© Kyodo News