Japan's remilitarization a fiscal dead end: China Daily editorial

The latest public opinion poll in Japan is a caution to the Sanae Takaichi government that it shouldn't allow the military buildup to consume the country's economic vigor. The Takaichi Cabinet's approval rating has fallen to 50.2 percent, its lowest level since she took office, while 71.7 percent of respondents say they are worried about Japan's fiscal health.

The immediate trigger may be a proposed cut in the consumption tax on food. The majority of respondents were worried the tax reduction could make it difficult for the government to sustain its social security system as Takaichi has failed to offer any alternative source of revenue to fill the fiscal gap to be left by the tax cut.

In fact, Takaichi appears to be promising everything at once: lower taxes, higher military spending, massive industrial investment, stronger security ties and faster growth. Japan's balance sheet, however, will not play ball.

She wants to protect households from inflation while maintaining an expansive fiscal and investment agenda. But the most conventional way to fight persistent inflation and support a weak yen is to allow the central bank to tighten monetary policy. The problem is that Japan cannot raise interest rates without confronting its debt mountain. This is the bind at the heart of Takaichi-nomics.

Takaichi's answer has increasingly been to promise investment and military spending as engines of "national renewal". But Japan has an aging population, a shrinking workforce, weak domestic demand and a shortage of resources. The proposed 370 trillion yen ($2.32 trillion) investment program over 14 years may help strategic industries, but no amount of government subsidy can substitute indefinitely for productivity growth, labor reform and a sustainable social security system.

The proposed domestic investment is to be accompanied by the cut in the food consumption tax from 8 percent to 1 percent. A complete elimination would represent roughly 5 trillion yen a year in lost revenue, so even the proposed reduction would leave a substantial hole. Meanwhile, the fiscal year 2027 military budget request stands at a record 8.9 trillion yen, and the final tally is on track to exceed 10 trillion yen as additional appropriations pile on.

This is where the rhetoric of "national strength" collides with the realities of the country's national debt. Japan already carries one of the heaviest public-debt burdens in the developed world. The 10-year Japanese government bond yield recently climbed to 2.95 percent, its highest level in about three decades. The Japanese Finance Ministry is preparing 36.6 trillion yen for government-bond principal and interest payments in fiscal year 2027, a 17 percent increase from the previous year.

The danger is a feedback loop: more spending requires more borrowing; more borrowing can raise investors' concerns; higher yields increase interest costs; higher interest costs consume fiscal space; and shrinking fiscal space makes every subsequent policy choice harder.

The Takaichi government has invested a considerable stake in promoting Japan's military, economic security and national identity. It has pressed ahead with controversial legislation on imperial succession and a backup capital, while its security policy is a de facto neo-militarist to-do list.

Yet unlike the right-wing forces, voters appear less interested in recovering yesterday's military "glory" than paying tomorrow's grocery bills.

In other words, Takaichi's main interest is remilitarization, while issues such as people's livelihoods and alleviating the burden on households take a back seat. The poll numbers on historical issues indicate that Japanese society is not unanimously behind her neo-militarist agenda. That is a big political gap.

The strongest mandate in the world cannot repeal arithmetic. Takaichi's ruling coalition may have won a Lower House majority, but it still faces resistance in the Upper House, and her popularity is already losing some of its protective cushion.

Takaichi vows to make Japan stronger. But strength is not measured by the number of missiles, submarines and warplanes a government can finance, but whether a country can pay its bills, maintain policy credibility and improve its people's well-being.

No country can become stronger in the long run by confusing military expenditure with economic vitality. Takaichi has a choice between political theater and economic discipline.

But even as the Japanese public grapples with the rising cost of living, Japanese Defense Minister Shinjiro Koizumi visited Australia and India last week, advocating Japan's "counterstrike capabilities" and promoting weapons exports. These moves reflect Takaichi is recklessly pursuing the wrong choice of expanding military and related industries while trying to cut taxes.

The more rational choice would be to embrace the trade-offs required for "national renewal": a credible tax base, structural reform, monetary-policy independence and spending that prioritizes the economy's long-term capacity. The neo-militarist drive should be discarded.

Japan's strained fiscal reality should serve as a stark warning to Takaichi: sacrificing public welfare for military expansion is a path to ruin. The problem, however, is that you can never wake someone who is pretending to be asleep.