Japan’s Ministry of Finance released data on the 31st that the remaining balance of the special accounting for foreign exchange funds set up to intervene in the foreign exchange market in 2022 is 3.4758 trillion yen (about 175 billion yuan). Due to the depreciation of the yen, etc., the amount was 640.8 billion yen more than expected. Disposal of the excess will be explored by the end of the year. Relevant funds are positioned as a source of revenue for strengthening defense capabilities, and this may be the basis for not temporarily raising taxes to secure defense revenue.
In special foreign exchange accounting, interest income is obtained by holding U.S. treasury bonds, etc., resulting in surplus funds. It was previously estimated that the remaining funds in 2022 will be 2.835 trillion yen, of which about 1.9 trillion yen has been decided to be transferred to defense. This time, the portion exceeding the forecast may be used by the ruling party as a source of defense funds.
The government’s 2022 general accounting balance announced on the 3rd also increased, and the amount transferred to national defense increased by about 600 billion yen compared with the estimated annual average. The surplus of the general account will also be a candidate for an alternative financial source for the defense tax increase.
The government decided in December last year that defense expenditures from 2023 to 2027 will increase by approximately 17 trillion yen compared with past levels, which will be filled through special accounting surplus funds and tax increases. The tax increase plan will be implemented after 2024 and is expected to exceed 1 trillion yen in 2027. There is a strong argument within the ruling party to suspend tax increases, and it is more likely that the tax increase plan from 2024 will not be implemented temporarily.
